Alibaba, Baidu shares soar on reported shift to in-house AI chips
Investing.com -- Oracle shares skyrocketed on Wednesday, a day after the software giant laid out a cloud growth outlook that Bernstein described as “rarely seen at this scale in the software industry.”
In response to the impressive print, the brokerage firm lifted its price target to $363 from $308 and reaffirmed an Outperform rating, highlighting Oracle’s rapid transition into a major hyperscaler and AI infrastructure provider.
Oracle guided to cloud infrastructure (OCI) revenue of $18 billion in fiscal 2026 (FY26), climbing to $144 billion by fiscal 2030, a path that could see it match or surpass Google Cloud by the end of the decade.
The progression includes $32 billion in FY27, $73 billion in FY28, and $114 billion in FY29.
“The Oracle story has shifted relatively quickly from a potential Cloud and hyperscaler story to a major hyperscaler and AI training / inferencing provider,” Bernstein analysts led by Mark Moerdler said in a note.
Oracle shares surged 36% higher on Wednesday, hitting a new all-time closing high of $328.33. A move like this “rarely happens for businesses of this size,” Moerdler said.
The guidance is already underpinned by a surge in long-term contracts. Remaining performance obligations (RPOs) rose 359% year-on-year to $455 billion, driven by four multi-billion-dollar deals across three clients, including OpenAI.
Management expects additional large deals in coming months.
Momentum is visible in current results too. OCI revenue reached $3.3 billion in the latest quarter, up 55% year-on-year, with consumption revenue up 57%.
Total cloud revenue grew 28% to $7.2 billion, while SaaS applications rose 11% to $3.8 billion, including double-digit growth in Fusion ERP and NetSuite.
Oracle’s multi-cloud database business grew 1,529% year-on-year from a small base, with partnerships across Microsoft, Google and Amazon expected to deliver triple-digit growth through FY26.
To meet demand, Oracle raised its fiscal 2026 capital spending guidance to $35 billion from $25 billion, after spending $8.5 billion in the first quarter.
Moerdler noted Oracle’s approach differs from peers as it rents rather than builds datacenters, creating a closer correlation between spending and revenue.
While AI training carries lower margins, the analyst expects high-margin multi-cloud database services to offset the impact over time.
The combination of booked revenue, unique datacenter architecture and expanding partnerships positions Oracle to deliver “very substantial earnings and free cash flow growth over the next 5–10 years,” he concluded.