Oracle Stock Sees Major Price Target Boost Amid Cloud and AI Expansion
BofA Securities has significantly raised its price target for Oracle Corporation, trading as ORCL on the New York Stock Exchange, to $220.00 from $156.00, while maintaining a 'Neutral' rating. This upgrade follows Oracle's strong fourth-quarter earnings report and ambitious fiscal year 2026 outlook.
The tech giant's shares are currently trading at a premium valuation, with a P/E ratio of 40.4 times, reflecting a robust market momentum that has seen the stock deliver a 27% return over the past year.
Oracle's Cloud Dominance Fuels Growth
Oracle reported impressive total cloud subscription growth of 27% in the fourth quarter, surpassing BofA's forecast of 26%. This outperformance was primarily driven by the company's Software as a Service, or SaaS, business, which accelerated to 14% year-over-year growth, up from 10% in the prior quarter, aligning with the growth rates of its application software competitors.
The company also maintained a strong gross margin of 71.1%, generating $55.8 billion in revenue over the last twelve months.
While Oracle Cloud Infrastructure, known as OCI, growth at 52% was slightly below BofA's expectation of 58%, it still marked an acceleration from 51% in the previous quarter, indicating continued strong momentum in its core cloud offerings.
Massive Investment in AI and Cloud Infrastructure
Looking ahead to fiscal year 2026, Oracle plans a substantial increase in capital expenditure, projecting $25 billion. This figure is significantly higher than BofA's earlier estimate of $18 billion, representing 37% of revenue. This aggressive investment underscores Oracle's commitment to meeting the escalating demand for cloud infrastructure, particularly in areas related to artificial intelligence projects.
Despite the increased capital outlay, which may temper operating margins to an estimated 41.6% for FY2026 compared to an initial target of 45%, the strategic pivot towards high-growth cloud and AI services is expected to drive long-term value.
Oracle also exceeded expectations in its latest earnings release, reporting fourth-quarter revenue of $15.9 billion, an 11% increase year-over-year. The company's cloud business demonstrated remarkable strength, with cloud infrastructure revenue surging by 62% and total cloud revenue growing 27% in constant currency.
For fiscal year 2026, Oracle has set a revenue guidance of $67 billion, projecting a 16% growth in constant currency, with cloud infrastructure revenue anticipated to grow over 70%. Several analyst firms, including Wolfe Research, Evercore ISI, and Jefferies, have also upgraded their price targets for Oracle, citing robust financial performance and positive growth forecasts.
What This Means for Investors
Oracle's strategic focus on cloud and AI infrastructure, backed by significant capital investments and strong subscription growth, positions the company for continued expansion. While increased expenditures might impact short-term margins, the long-term outlook remains positive as Oracle solidifies its position in the rapidly evolving technology landscape.
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