Oracle stock (ORCL) staged a dramatic rally on Thursday after executives pushed back against recent skepticism over the profitability of its AI server-rental business. The move came during a high-stakes briefing for analysts, where management clarified that gross profit margins are far healthier than critics suggest.
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The company specifically addressed a report published last week in The Information, which claimed Oracle’s fast-growing AI cloud business carried just a 14% margin. Oracle fired back, saying the figure only reflects the upfront cost of standing up data centers before customers go live, not the true margin over a contract’s full term.
“The actual gross margin across the entire life of the contract is 35%,” Oracle said, sending the stock up nearly 4% within a minute during the presentation.
Beyond that, analysts noted the clarification eased market jitters, especially given Oracle’s rapidly expanding customer base in AI infrastructure. Still, Oracle’s number sits below competitors like CoreWeave (CRWV), which recently posted a 51% gross margin.
Oracle Raises the Bar with Ambitious 2030 Forecasts
After cooling doubts on margins, Oracle turned its focus to the future, and it came with big numbers. The company upgraded its 2030 revenue target for Oracle Cloud Infrastructure from $144 billion to $166 billion, reflecting expected 75% annual growth from fiscal 2025’s $10 billion.
More broadly, Oracle lifted its long-term companywide revenue target to $225 billion for 2030, up from a previous $104 billion forecast for 2029. Executives now see both revenue and earnings per share growing at around 30% annually over the next five years.
The optimism stems largely from a booming pipeline. Oracle’s total backlog of contracted work now stands above $500 billion. However, $300 billion of that is tied to a single, multiyear deal with OpenAI. However, whether OpenAI can fund its side of the commitment remains a major unknown.
Wall Street Balances Bullish Targets against Lingering Doubts
While Thursday’s analyst day started strong, Oracle stock whipsawed as financial projections were unpacked. Shares closed up 3.1% on Thursday but turned negative in premarket trading Friday, falling 3.6% after CFO Doug Kehring laid out the full company outlook.
Still, several firms stood by their bullish calls. Analysts at KeyBanc Capital Markets reiterated an Overweight rating and a $350 target, writing, “The company modeled its long-term outlook as pursuing customers based on profit potential, while staying focused on cost discipline, and utilizing a variety of financing options for growth.”
Meanwhile, Melius Research’s Ben Reitzes raised his price target to $400, noting, “Demand for AI workload capacity has reached unprecedented levels due to massive inferencing growth from reasoning models. Oracle is emerging as a major beneficiary.”
Is Oracle a Good Stock to Buy?
Currently, Wall Street has a Moderate Buy consensus rating on Oracle stock based on 27 Buys, eight Holds, and one Sell recommendation. The average ORCL stock price target of $348.44 indicates 11.3% upside potential from current levels.
