The super large order in cloud computing ignites Oracle's upward trend, Jefferies raises target stock price to $270

According to the Zhitong Finance APP, Wall Street financial giant Jefferies has significantly raised the target price for Oracle (ORCL.US) from $220 to $270, maintaining a "Buy" rating, citing that "large cloud computing deals" are accelerating the company's performance growth. As of Tuesday's market close, Oracle's stock price rose nearly 1% to $234.50, reaching an intraday record high of $241.439, with a price increase of over 40% since the strong performance outlook was announced in June.

The analyst team led by Brent Thill at Jefferies pointed out that several recent large cloud computing deals by Oracle (including a contract expected to generate over $30 billion in annual sales starting from fiscal year 2028) mark a critical step in the company's transformation towards becoming a hyperscale cloud vendor, with market share expected to get closer to the two super cloud giants, Amazon AWS and Microsoft Azure.

The Jefferies analysis team stated that the scale of these large deals indicates significant upside potential in the market consensus expectations for Oracle's cloud infrastructure as a service (IaaS) sales and total sales for fiscal year 2028, estimated at $46 billion and $93 billion, respectively, while substantially reducing the risk of achieving the company's total sales target of $104 billion for fiscal year 2029.

Analysts added that Oracle stands out among cloud computing leaders, with no other large software company or cloud computing firm focused on IaaS and SaaS achieving over 100% remaining performance obligation (RPO) growth while sales growth continues to accelerate.

$30 Billion Super Deal!

The Jefferies analyst team stated that last week Oracle announced a series of milestone cloud service agreements, the most notable being a landmark contract expected to generate over $30 billion in annual sales starting from fiscal year 2028. Although the identity of the client has not been disclosed, Jefferies analysts speculate that Oracle's Stargate project and its increasingly deepening partnerships with OpenAI, SoftBank, and ARM are related.

In another announcement, Oracle revealed it will lease up to 4.5 gigawatts of super data center capacity to OpenAI, highlighting its key role in expanding AI infrastructure.

Jefferies analysts believe these developments mark a significant turning point in Oracle's cloud computing strategy, likely reshaping investors' core discussions about the sustainability of backlog growth, the timing of sales super inflection points, and the company's ability to monetize AI demand on a large scale. Analysts pointed out that these large cloud computing deals have enhanced their confidence in Oracle achieving over 100% RPO growth guidance for fiscal year 2026.

Jefferies analyst Thill and his team stated that the current Wall Street consensus model expects Oracle's IaaS sales for fiscal year 2028 to be approximately $46 billion and total sales to be around $93 billion, with a single large cloud computing deal potentially accounting for over 65% of the projected IaaS sales and nearly one-third of total sales for that year "Although full realization will take several years, the visibility and scale of these commitments significantly reduce the risk of Oracle's $104 billion sales target for fiscal year 2029 and increase the likelihood of a substantial upward adjustment to its long-term financial framework at the upcoming 'CloudWorld Analyst Day,'" said the Jefferies analysis team.

The demand for AI computing power continues to explode! The veteran tech giant Oracle is undoubtedly one of the super winners of the 'AI boom.'

Dan Morgan, a senior portfolio manager at Synovus Trust, recently stated that the market focus has shifted to Oracle's strategic execution capabilities following a market capitalization increase of up to $116 billion in just one week after the earnings announcement. The potential for development in the AI field reminds him of Microsoft's strategic pivot into cloud computing a decade ago and the explosive growth turning point of NVIDIA's data center business in 2023.

"Expectations may be overly optimistic, but Oracle is in its 'adolescence' and has yet to hit its ceiling," Morgan said. "Perhaps in the future, when we look back at this quarter, we will realize it was a turning point—we will recognize that there is still such a vast growth space ahead."

Known globally for its cloud computing services and database software, Oracle is one of the biggest winners of the global AI boom. Riding the wave of AI, Oracle's stock price has risen by 60% in 2024, with a staggering 45% increase this year alone, frequently hitting historical highs and currently hovering near its all-time peak. Amid the global tech industry's intensified efforts to deploy generative AI technologies similar to ChatGPT, Oracle stands out as one of the biggest winners, with its global customer base for Infrastructure as a Service (IaaS) and Software as a Service (SaaS) cloud applications becoming increasingly vast.

The fourth-quarter results for fiscal year 2025, released in June and ending May 31, showed that Oracle's Remaining Performance Obligations (RPO)—a key indicator measuring demand and bookings for tech companies—reached $138 billion, up from $130 billion in the previous quarter. The significant increase in RPO largely indicates Oracle's success in securing large-scale long-term customer subscription commitments in the cloud computing business. Oracle's overall cloud computing business (including IaaS and SaaS) saw a year-on-year sales increase of 27%, reaching $6.7 billion, in line with analyst expectations; among them, the cloud infrastructure business (i.e., IaaS) sales grew by 52% year-on-year to $3 billion.

Even more significantly, CEO Safra Catz stated during the earnings call that cloud infrastructure (IaaS) sales for fiscal year 2026 are expected to grow by over 70%, compared to a 52% increase this quarter. She also predicted that the company's sales for fiscal year 2026 would exceed $67 billion, higher than the analyst average expectation of approximately $65.18 billion. This IaaS market outlook has greatly boosted investor optimism regarding Oracle's cloud computing business, leading investors to increasingly believe that, driven by AI, Oracle's market share in cloud computing will eventually rival that of Amazon AWS and Microsoft Azure Wall Street analysts have recently been continuously raising their performance and stock price outlook for this 48-year-old technology company, mainly based on the enormous growth potential of its cloud computing services as clients increasingly turn to artificial intelligence application software products. The high growth prospects, especially for the next fiscal year's cloud infrastructure business, directly reflect the hunger for AI training/inference on AI computing resources and show that Oracle's cloud infrastructure business (i.e., Oracle OCI) is significantly capturing the core AI infrastructure that was almost monopolized by cloud computing leaders AWS, Azure, and Google Cloud Platform (GCP).

In terms of the progress of AI infrastructure construction, large-scale super AI infrastructure projects like the $500 billion "Stargate" cannot be separated from the participation of cloud giants such as Microsoft, Oracle, and Amazon AWS. Globally, the upcoming wave of global AI infrastructure led by governments will also rely on the participation of cloud computing giants like Alibaba and Tencent, as well as SAP and OVHcloud in AI infrastructure construction. A significant proportion of global funds invested in the AI infrastructure sector will be directed towards AI infrastructure construction centered on "IaaS+PaaS+SaaS" that integrates high-performance AI computing hardware such as AI GPUs and AI ASICs.

The "Stargate" project, a massive AI infrastructure initiative, aims to create ultra-large-scale data centers capable of supporting astronomical levels of AI computing demand. Building such data centers requires robust cloud computing infrastructure and storage resources to accommodate large-scale high-performance AI computing hardware. As a leading global cloud computing service provider, Oracle can provide the immense core AI infrastructure and cloud application software services needed, and it has extensive experience in data center construction and operation, thereby driving a strong growth trend in demand for its cloud computing services