Shares of Oracle Corp. ( ORCL ) rose 9% after the company delivered a stellar quarter this week, signaling strong momentum in its cloud, artificial intelligence (AI), infrastructure and database businesses. The strong earnings report highlighted the company’s successful transition from a legacy software vendor to a leading cloud and AI infrastructure provider. This sudden rally in ORCL stock, which is otherwise down 20.19% year-to-date (YTD), also reflects investor optimism that Oracle’s AI-driven growth can sustain strong revenue and earnings growth in the coming years.
Much of this investor interest stems from a large number that appeared in Oracle’s results. Even Wall Street is optimistic that the stock could rise to $400 in the next year. Let’s find out if it can.
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Oracle reported the third quarter of fiscal 2026, with organic total revenue and adjusted EPS both rising 20% or more for the first time in 15 years. Total revenue rose 22% to $17.2 billion on a 21% increase in adjusted earnings per share of $1.79, beating consensus estimates. Previously, Oracle relied mainly on licensing sales, which were more cyclical. The company’s transition to a recurring revenue model for cloud subscriptions and infrastructure services appears to be paying off, as revenue is now predictable and scalable.
What surprised investors in Q3 earnings was the phenomenal growth in this emerging infrastructure business. Multicloud database revenue increased 531% year-over-year (YOY), while AI infrastructure revenue increased 243% over the same period last year. Oracle has partnered with major cloud providers such as Microsoft ( MSFT ), Alphabet ( GOOG ) ( GOOGL ), and Amazon ( AMZN ), enabling customers to run Oracle databases on different clouds. This multicloud strategy is driving significant demand from enterprises that want flexibility without sacrificing Oracle database technology. In addition, management emphasized that demand for AI infrastructure, such as GPUs and high-performance computing capacity, continues to outstrip supply.
Oracle’s staggering $553 billion residual performance obligation (RPO) is perhaps what has reignited investor interest in the company. RPO represents the contracted future revenue that has not yet been received. Management said the backlog, which increased 325% YOY, reflected strong demand for AI infrastructure and cloud services. To fuel future growth, Oracle and its partners have provided more than 10 gigawatts of data center power capacity to come online over the next three years.
Interestingly, more than 90% of this capacity is already funded by shareholders, reducing the financial burden on Oracle. The company has signed more than $29 billion in new contracts using innovative infrastructure financing models that allow customers to donate hardware or provide upfront payments. This enables Oracle to grow rapidly while maintaining high profits. Analysts expect Oracle’s earnings to grow 36.59% in fiscal 2026.
Despite this strong operating performance, there are a few areas that investors should monitor. Oracle has invested heavily in data centers and AI infrastructure to meet the growing demands of the cloud. Even if revenue increases, it can temporarily squeeze cash flow. The company generated negative free cash flow of $24.7 million during the quarter. Meanwhile, the company has a debt-to-equity ratio of about 3.28, which is high. But an interest coverage ratio of 4.96 suggests its current earnings can handle interest payments without immediate financial stress.
On the balance sheet, it currently has about $39.1 billion in liquid funds that can be used for operations, investments, debt repayments, or acquisitions.
Overall, Wall Street rates Oracle stock a “strong buy” consensus. Out of 42 analysts covering the stock, 32 rate it a “strong buy”, one says it is a “neutral buy”, eight rate it a “hold”, and one says it is a “strong sell”. The average target price for Oracle stock is $264.92, representing a potential upside of 70.8% from its current levels. Many analysts have set a high price estimate of $400 for ORCL stock, which suggests it has the potential for a 158% upside over the next year.
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The acid case rests on the explosive growth in AI infrastructure, the rapid expansion of multicloud database services, the vast backlog of contracted revenue, and increasingly predictable recurring revenue streams. If Oracle continues to scale its AI and cloud businesses at the current pace, analysts believe the company could maintain strong double-digit revenue and earnings growth for several years. However, for ORCL to reach $400, it will likely require continued execution, continued demand for AI infrastructure, and broad market support for high-growth tech stocks.
I believe that while the path to $400 may take some time, Oracle’s transformation into an AI-driven cloud powerhouse is gaining serious momentum, making it the best AI buy and hold for the next decade or so.
As of the date of publication, Sushree Mohanty had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
