Wall Street institutions support Oracle (ORCL.US) and emphasize that its AI business growth potential will far exceed market expectations

The Zhitong Finance App learned that on Thursday, despite mixed quarterly results announced by Oracle (ORCL.US), which led to a sharp drop of more than 14% in the stock price, several Wall Street institutions stood up for the IT giant, stressing that the company's growth potential in the artificial intelligence business would far exceed market expectations. Affected by the sharp drop in Oracle's stock price, AI-related technology stocks such as Microsoft (MSFT.US), Nvidia (NVDA.US), and AMD (AMD.US) are under pressure at the same time.

Wedbush Securities analyst Dan Ives said investors should not pay too much attention to slightly lower than expected revenue, but should focus on the size of the “remaining performance obligation” (RPO) on the company's books. Oracle Text's quarterly RPO reached $523 billion, significantly higher than Wall Street's previous estimate of $500 billion. Ives pointed out that the new RPO for the quarter reached $69 billion, compared to only $8 billion, $33 billion, and $2 billion in previous quarters, respectively. “This is the core metric we're most concerned about, not the revenue performance of this quarter or next quarter,” he wrote in the report. “Over the long term, these AI-related backlogs will turn into impressive revenue growth over the next few years: we expect to grow by more than 17% in FY2026, around 35% in FY2027, and around 45% in FY2028.”

In its financial report, Oracle reiterated its revenue guidance for the 2026 fiscal year of $67 billion, which is in line with the market. The company's management said during the conference call that the new large-scale RPO will be gradually monetized in the future and converted into revenue in a short period of time. The company expects to contribute an additional approximately $4 billion in revenue in the 2027 fiscal year.

In response to market concerns that Oracle might need to raise huge debts to expand AI computing power and data center capabilities, Ives said these concerns were exaggerated. He pointed out that the actual amount of financing required by Oracle may be far lower than the 100 billion US dollars rumored by the outside world. “From our perspective, this is a 'high quality trouble' because demand is so strong, this is a challenge that companies must deal with in the AI wave.”

BNP Paribas analyst Stefan Slowinski held a similar view and said that Oracle's quarterly performance, particularly cloud infrastructure (OCI) revenue, gave the market a sigh of relief. He pointed out that even though the market is concerned about delays in construction of the key data center Abilene, OCI achieved 66% growth in the current quarter using a fixed exchange rate calculation, and the performance exceeded expectations. He added that free cash flow fell to -$10 billion due to a surge in capital expenditure (reaching $12 billion this quarter, 46% higher than market expectations), but this reflects strong investment in OCI expansion, and there are no signs of delays in data center construction.

Slowinski gave Oracle a “buy” rating and maintained a target price of $290.