Oracle stock price target lowered to $185 by Evercore ISI

On Tuesday, Evercore ISI analysts adjusted their outlook on Oracle (NYSE:ORCL) shares, reducing the price target to $185 from $200, while maintaining an Outperform rating. The revision follows Oracle’s latest financial results, which presented a mixed picture. According to InvestingPro data, Oracle currently trades at a P/E ratio of 36.4x and commands a market capitalization of $416 billion, with analysts setting price targets ranging from $130 to $227. The company reported revenue and earnings per share slightly below expectations, but significantly exceeded projected Remaining Performance Obligations (RPO) with $130 billion compared to the estimated $105 billion. This RPO beat was attributed in part to several large deals, with Oracle noting broad-based demand for its Oracle Cloud Infrastructure (OCI) that continues to surpass its capacity. InvestingPro analysis shows Oracle maintains strong profitability with a 71.3% gross margin and has achieved revenue growth of 6.4% over the last twelve months, reaching $54.9 billion.

Oracle’s guidance for fiscal year 2026 forecasts a 15% revenue growth, with the potential to accelerate up to 20% by fiscal year 2027, not considering any contributions from its Stargate project. For the fourth fiscal quarter, the company anticipates cloud revenue growth of 26-28% in constant currency, suggesting an uptick from the 25% growth seen this quarter. Despite these positive indicators, Oracle’s cloud margins, particularly those related to artificial intelligence, are expected to impact gross margins, and operating margins are predicted to decrease in FY26. Consequently, Evercore ISI has slightly reduced their FY26 earnings per share estimate by $0.07, with revenue estimates increasing to a 13% growth from 11.7%.

The report also highlighted that Oracle’s third fiscal quarter revenue shortfall was mainly due to component shortages affecting capacity and a shift of approximately $100 million in license revenue. These capacity issues are anticipated to persist into the fourth quarter, but cloud growth is expected to accelerate. InvestingPro research indicates Oracle maintains a solid financial foundation with a "GOOD" overall health score, despite current challenges. Investors seeking deeper insights can access Oracle’s comprehensive Pro Research Report, one of 1,400+ detailed company analyses available on InvestingPro. Additionally, the company’s capital expenditures were higher in the third quarter at approximately $6 billion, but are projected to normalize to around $4 billion in the fourth quarter. Other notable financial metrics include a 57% increase in OCI consumption revenue, with GPU consumption revenue now 3.5 times larger than the previous year. Cloud database services grew by 28%, reaching a $2.3 billion revenue run rate, and Autonomous consumption revenue is up by 42%.

Evercore ISI suggests that while the market adjusts its operating margin expectations, the advantages of accelerating revenue and OCI growth outweigh the drawbacks of a mixed third quarter and lower operating margins and free cash flow. They believe that with market estimates likely to be reset, the risk/reward balance tilts favorably for investors willing to look ahead to the latter part of 2025. The stock has demonstrated strong long-term performance, with InvestingPro data showing a 31.8% return over the past year, despite recent volatility that has led to a 10.5% decline year-to-date.

In other recent news, Oracle Corporation reported its third fiscal quarter of 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $1.47, below the consensus estimate of $1.49, and reported revenues of $14.1 billion, which fell short of the anticipated $14.39 billion. Despite these misses, Oracle’s cloud revenue showed a strong year-over-year increase of 25%, reaching $6.2 billion. The company also announced a significant expansion in AI infrastructure, partnering with NVIDIA (NASDAQ:NVDA) and AMD (NASDAQ:AMD), which aligns with its strategic focus on AI and cloud services.

Oracle’s Remaining Performance Obligations (RPO) reached $130 billion, marking a 62% year-over-year increase, significantly surpassing prior estimates. This surge in bookings and a robust pipeline led Oracle’s management to raise growth expectations to 15% for fiscal year 2026 and 20% for fiscal year 2027, exceeding KeyBanc’s forecasts. Analysts at KeyBanc Capital Markets maintained an Overweight rating on Oracle’s shares, emphasizing confidence in the company’s future performance.

Meanwhile, JMP Securities maintained its Market Underperform rating for Oracle, despite the company’s record bookings quarter. Oracle’s Infrastructure as a Service (IaaS) and Software (ETR:SOWGn) as a Service (SaaS) segments experienced slower growth compared to previous quarters, with IaaS growing by 49% and SaaS by 8% year-over-year. As Oracle continues to expand its cloud services and compete in the tech landscape, these developments will be closely monitored by investors.

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