Wall Street recovered Oracle ( ORCL ) stock from the dog house on Wednesday after the company reported better-than-expected third-quarter results and raised fiscal 2027 revenue to $90 billion.
Investors welcomed the news, with Oracle shares rising as much as 14% in early trading on Wednesday. Analysts took the 2027 outlook as positive, although some also noted the risk that part of Oracle’s fortunes is tied to OpenAI ( OPAI.PVT ).
“It is encouraging that Oracle is developing the most diverse pipeline of cloud and AI deals in the enterprise in our view,” BofA Global Research analyst Brad Sales wrote in a note to investors after Oracle’s earnings announcement.
“However, there was little update on the big OpenAI contract,” he said. “Uncertainty remains regarding the timing and ability of services to deliver this key contract.”
William Blair analyst Sebastian Nagy offered a similar take on the risk posed by Oracle’s OpenAI contract.
“Our rating risks include customer concentration (with OpenAI representing more than $300 billion (remaining performance obligations (RPO)); weaker-than-expected performance from Oracle’s cloud and independent database products; increased competition in the database, application and cloud businesses; and lower-than-expected margins and no free cash write-downs.”
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For the third quarter, Oracle said it had $523 billion in RPO, up $29 billion from the previous quarter. This means it has contracts for $523 billion that it must complete before it can be paid by its customers. Outside of the OpenAI question, however, analysts see Oracle’s quarter as a success.
The company saw earnings per share (EPS) of $1.79 on revenue of $17.19 billion, topping the consensus estimate of $1.70 and revenue of $16.9 billion.
Oracle Cloud’s segment brought in $8.9 billion, compared to an estimate of $8.8 billion, while cloud infrastructure sales of $4.9 billion topped expectations of $4.74 billion.
“The $30 billion incremental RPO … and FY27 revenue outlook point to strong demand for both AI infrastructure and legacy cloud services,” Sales wrote.
Oracle also noted in its earnings release that it will not increase capital expenditures to pay for the infrastructure required for RPO contracts, saying that “much of the required equipment is financed either through customer prepayments so Oracle can purchase GPUs, or customers purchase GPUs and supply them to Oracle.”
