Oracle (ORCL) shares declined 4% on Thursday, caught in a broad sell-off of large-cap technology stocks, even as analysts responded favorably to the company's latest artificial intelligence infrastructure plans and long-term financial targets. The Nasdaq Composite fell 1.57%, while the S&P 500 slipped 0.54%.
During Oracle's AI World and Analyst Day, management provided greater clarity on its infrastructure expansion, financing requirements, and expected cash generation. However, analysts emphasized that execution remains a key risk.
BNP Paribas analyst Stefan Slowinski reiterated an Outperform rating with a $248 price target, citing improved visibility into financing needs, free cash flow, and returns from AI infrastructure investments. Oracle reaffirmed its fiscal 2030 targets of more than $225 billion in revenue and earnings exceeding $21 per share. The company also aims to have approximately 10 gigawatts of infrastructure capacity as it expands its AI computing business.
Oracle outlines path to positive free cash flow
One of the key takeaways from the investor event was Oracle's updated timeline for generating positive free cash flow. The company expects capital expenditure to peak in fiscal 2027 and 2028 before moderating in fiscal 2029. Oracle projects free cash flow to turn positive in the second half of fiscal 2028 and reach $30 billion in fiscal 2029.
Jefferies analyst Brent Thill said the updated outlook was a significant development for investors. “The bigger surprise was the FCF path: ORCL now expects to turn FCF positive as soon as F2H28, more than 12 months earlier than current Street estimates,” Thill wrote in a Thursday investor note. He added that the company expects capital expenditure to step down in fiscal 2029, allowing Oracle to fund more of its future investments internally rather than repeatedly accessing capital markets. Jefferies maintained its Buy rating and $290 price target. Morgan Stanley, meanwhile, retained its Equal-weight rating and $210 target, citing the need for greater confidence in execution.
Financing plans and infrastructure economics
Oracle plans to raise $20 billion in fiscal 2027, with the financing expected to be split roughly equally between debt and equity. The company also intends to rely more heavily on vendor financing and bring-your-own-hardware arrangements to reduce upfront capital requirements for new projects.
BNP Paribas' Slowinski said Oracle expects no additional capital requirements beyond the planned fundraising, supported by improving cash generation as infrastructure capacity becomes operational. Oracle has raised pricing on new five-year contracts to approximately $16 billion per gigawatt, up from around $10 billion previously. Management believes the higher pricing could support a 28% return on invested capital.
Wells Fargo analyst Michael Turrin highlighted the economics of the infrastructure strategy, noting that vendor financing reduces near-term cash requirements, while bring-your-own-hardware arrangements can lower capital needs to about $6 billion per gigawatt or less. Wells Fargo maintained its Overweight rating and $250 price target.
Execution risks remain despite bullish forecasts
Analysts broadly welcomed Oracle's financial targets but cautioned that delivering the planned infrastructure expansion will be critical. Morgan Stanley analyst Sanjit Singh said the company had provided greater visibility into its plans but that investors needed more confidence in capacity delivery and margins.
“Simply put, we walk away with the vision and the visibility but need more confidence in execution, namely capacity tracking the path to ~10GW by FY28 and margins holding near 40% through the ramp, before turning more positive,” Singh said.
Jefferies' Thill noted that Oracle's contracted backlog supports approximately 7 gigawatts of incremental capacity, taking total capacity to around 10 gigawatts by the end of fiscal 2028. However, power availability, permitting, and labor constraints remain risks. The first major tests are expected in the first half of calendar 2027, when the Shackelford, Texas, and Doña Ana, New Mexico, sites are scheduled to begin customer delivery.
This article is for informational purposes only and does not constitute financial advice.
