Oracle (ORCL) has sold off sharply, from its 2026 peak near $346 to just $175 today. My average entry price is $165 per share, and I’m staying bullish given the technology leader’s strategic transition from a software powerhouse to an artificial intelligence (AI) infrastructure leader. I see a future where Oracle stock is worth more than $300 in 18 months, and consensus supports my view.
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Oracle is smart to pivot aggressively here, and even if the balance sheet is tighter than one would like, if anyone can pull it off, it’s the Chairman of the Board, Larry Ellison.
Oracle Transforms into an AI Juggernaut
Oracle’s Software as a Service (SaaS) focus, moving to Infrastructure as a Service (IaaS), is already proving fruitful. IaaS revenue was up by 84% year-over-year in Q3, whereas SaaS was up by 13% year-over-year. The shift was already visible even before Fiscal 2026, as cloud services rose to 43% of FY25 revenue from 37% in Fiscal 2024 and 32% in Fiscal 2023. Moreover, infrastructure supplied 74% of FY25 cloud and support revenues.
Multicloud database revenue is one of the real return drivers, with the vector delivering revenue growth of 115% from Q3 to Q4 of Fiscal 2025, followed by 817% year-over-year in Q2 of Fiscal 2026, and then a further 531% in Q3. Hyperscaler-embedded datacenter buildouts were the main driver of demand. However, the upside doesn’t stop at compute rental. Management is positioning AI across datacenter software, autonomous database, analytics, and applications. This sets Oracle up to capitalize broadly if enterprise inference scales as expected.
Oracle has strong demand visibility, with Remaining Performance Obligations (RPO) surging from $138 billion at Q4 FY25 to $455 billion in Q1 FY26, and most recently $553 billion in Q3. It shines as a medium- to long-term investment, especially if valuation responds to growth, as management expects only roughly 30% of RPO to materialize over the next 12 months.
Keep in mind, though, the market typically prices in growth about 12 months out, creating potentially exceptional exit opportunities ahead. The ORCL position needn’t be a hold-through-thick-and-thin affair; you can tactically buy, sell, and repurchase as valuation cycles emerge.
Oracle Has a New Set of Risks
Even though I’m bullish and an investor, it’s important to acknowledge the changes and challenges that the company faces in its years ahead. Firstly, the capital profile has reset, with Fiscal 2025 capex jumping 209%. In short, ORCL is more like a buildout stock now than what it used to be: a capital-light software leader.
As a result, free cash flow has turned negative. It was positive at $11.8 billion in Fiscal 2024, negative at $0.4 billion in Fiscal 2025, and now minus $24.7 billion on a trailing-four-quarter basis as of Q3 of Fiscal 2026. The knock-on effect is that the balance sheet is also strained, with cash at $38.5 billion and notes payable and other borrowings at $134.6 billion.
We also have to consider that AI accelerator supply is extremely competitive, and so Oracle says it sometimes accepts less favorable supplier terms to secure graphics processing units (GPUs), raising obsolescence and margin risk. That said, with such a strong backlog and bullish Fiscal 2027 revenue guidance of $90 billion, I feel constructive and confident that the RPO will convert successfully to durable returns for investors.
The weekly relative strength index (RSI) remains at 50, indicating that sentiment is not overdone from a medium-term perspective, and I see no reason to trim or exit; rather, I am compelled to just ride this wave to greater upside.
Is Oracle a Good Stock to Buy?
On Wall Street, Oracle has a consensus Strong Buy rating, based on 27 Buys, six Holds, and zero Sells. The average ORCL price target is $245.11, indicating a 40.01% upside potential over the next 12 months.
The price has surged somewhat recently, with a 25% return in the last five days alone. That said, I’m holding this investment for the medium term and see a return to all-time highs before long.
Oracle Is Still Cheap and Positioned for Alpha
In summary, I think we have a mispriced stock here in a high-growth industry, and management’s decision to pivot to AI is an act of courage and competence. The balance sheet may be a little rich in debt, but given the strong growth the company is exposed to via the AI infrastructure supercycle, one can look past this as the price of the pivot rather than a problem in and of itself.
We’ve already seen the tangible results of the company’s new operating model in recent financial reports, and the stock mispricing recently has been amid the durability of capex and credit fears. These aren’t misplaced, but when a stock starts selling off, the discount emerges from too much pessimism. In this instance, I’m well aware of the risks but am confident I can trade this stock to fair value and even all-time highs.