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Investing.com -- Stifel raised Oracle Corp (NYSE:ORCL). to Buy from Hold, saying the software maker’s stepped‑up capital spending and swelling backlog point to “sustainable” growth in its cloud businesses.
The brokerage raised its price target to $250, valuing the stock at about 30 times its forecast 2027 earnings of $8.35 per share.
Oracle’s remaining performance obligations, a measure of contracted future revenue, jumped 41% year over year to $138 billion, driven by demand for computing power tied to artificial‑intelligence workloads and by customers running Oracle databases on Amazon (NASDAQ:AMZN) Web Services, Microsoft (NASDAQ:MSFT) Azure and Google (NASDAQ:GOOGL) Cloud.
With orders outpacing supply, Oracle plans to lift capital expenditure about 20% to roughly $25 billion in fiscal 2026 and more than double its multicloud data‑center count to 47 over the next year, the analysts said.
They estimate total cloud revenue will grow in the high 30% range annually for each of the next 2 fiscal years, reaching about $46.5B by 2027
Stifel expects cloud to account for the company’s entire revenue increase through 2027 and sees total revenue rising about 16% in fiscal 2026 and 20% the following year.
Higher spending on data centers is likely to squeeze gross margins in the near term, the note said, but Oracle’s tight rein on operating expenses should keep overall profitability intact.
Operating margins are projected to bottom at roughly 42% in fiscal 2026 before improving as revenue outpaces costs.
The combination of sustainable Cloud growth and opex discipline should enable Oracle to overcome revenue‑mix headwinds and post accelerating EPS growth in FY27 and beyond, Stifel wrote.