Oracle's fiscal first-quarter results beat expectations, and management guided to $8.10 in adjusted earnings per share on at least $90 billion in revenue for fiscal 2027, both ahead of Street estimates. The company continues to ride surging demand for AI workloads, yet its shares remain more than 35% below their recent high.
Jefferies senior analyst Brent Thill, in a post-earnings interview with CNBC, highlighted Oracle's remaining performance obligations (RPO), which jumped 46% year over year. He also noted that the 120% growth in Oracle's cloud infrastructure business should put concerns about AI capital spending and return on investment to rest.
Thill maintains a Buy rating on Oracle with a $290 price target, implying roughly 80% upside from current levels. Given management's projection of $20 in earnings power three years out, he believes a $400 stock price is reasonable over the long term. However, he places Oracle in a "tier 2" group among major cloud infrastructure providers, ranking Microsoft, Amazon, and Alphabet ahead of it as primary long-term holdings.
The tier-1 hyperscalers, according to Thill, benefit from stronger balance sheets, more attractive core business multiples, and deeper market penetration. Oracle, which entered the cloud buildout phase with a lower structural valuation multiple, faces challenges from its debt burden and negative free cash flow of $5.4 billion in the first quarter. These factors, he argues, make MSFT, GOOGL, and AMZN more compelling for core cloud portfolios.
Despite these concerns, Oracle's latest report reinforces its position among the elite five mega-scale infrastructure builders powering the generative AI era. The company's legacy software grew at a double-digit rate, while cloud infrastructure expanded at triple-digit pace, confirming that its growth engine remains intact.
Debt loads and concentration risks, particularly related to partnerships like OpenAI, continue to overhang the stock. However, Thill contends that much of this negativity is already priced in. For tactical investors, Oracle shares may offer a discounted opportunity, even if tier-1 hyperscalers remain the preferred choice for core holdings.
Oracle also pays a dividend yield of 1.31%, which adds to its appeal for longer-term investors. As the AI infrastructure race intensifies, investors may want to monitor how Oracle's financial flexibility evolves relative to its larger rivals. For more on Oracle's AI backlog and options activity, see Oracle options hint at 11% swing. Meanwhile, Google's €13B Finland bet underscores the scale of investment among tier-1 players.
Oracle's upcoming second-quarter earnings will be closely watched for continued cloud momentum and any updates on its AI partnerships. Analysts remain split on the stock's near-term recovery, as seen in Oracle shares slide 5% as bond yields climb. For a broader view of AI infrastructure plays, Nvidia CEO ties AGI to OpenAI's Astra highlights other names in the space.
This article is for informational purposes only and does not constitute financial advice.
