Oracle Is the ‘AI Juggernaut for the Information Age.’ Why the Stock Isn’t Acting Like It.

Baird analysts initiated coverage on Oracle stock with a Buy rating and $365 price target. (Photograph by David Paul Morris/Bloomberg)

Key Points

• Oracle shares are 17% below their post-earnings peak, prompting questions about a buying opportunity versus legitimate concerns.
• Baird initiated coverage with an Outperform rating and a $365 price target, projecting a 25% rise for Oracle stock.
• Phillip Securities rated Oracle a Buy with a $350 target, citing a 359% surge in backlog to $455 billion in the first quarter of fiscal 2026.

“When you innovate, you’ve got to be prepared for everyone telling you you’re nuts,” Oracle Chief Technology Officer Larry Ellison once said.

His words ring true today. Wall Street is questioning not just the current fundamental performance of the business he co-founded, but enthusiasm about artificial intelligence as a whole.

Oracle shares are trading 17% below the level they reached following a 36% post-e a rnings surge on Sept. 10. This week, the stock pulled back to its 21-day exponential moving average—a metric that places emphasis on recent price changes—for the first time since moving decisively upward from $260.97 last month.

This all raises the question of whether a buying opportunity has emerged or whether the pullback reflects legitimate concerns.

Some analysts are unperturbed. Baird initiated coverage on Oracle stock Wednesday evening, rating it at Outperform with a $365 price target, suggesting the stock could rise 25% from the price early Thursday. Shares were up 1.1% at $291.15 in early trading.

The firm describes Oracle as an “AI juggernaut for the information age” that is “maniacally focused on database innovation.” That reflects Baird’s optimism that Oracle will continue to see gains and capitalize on AI-fueled demand for computing power.

The company’s reach spans not just AI infrastructure, but also applications. Oracle is, at its heart, a software play, and offers a full suite of applications tailored to manage large amounts of information.

With revenue increasingly shifting towards its cloud computing segment, Baird sees a path toward revenue growth of 20% by fiscal 2027. Total revenue growth in fiscal 2024 was 8%.

The combination of software-as-a-service applications and infrastructure spending should support multiple years of growth, the analysts wrote, noting that operating margins have stayed in the 40% to 45% range even though Oracle has been investing heavily.

Phillip Securities, a Singapore-based research firm, initiated coverage on Thursday, rating the stock at Buy with a $350 target price. The firm noted that Oracle’s backlog of remaining performance obligations surged 359% in the first quarter of fiscal 2026 to $455 billion, an achievement that has earned it plenty of praise.

The company has told investors to expect revenue at its cloud infrastructure segment to reach $144 billion by the end of fiscal 2030, implying a 68% compound annual growth rate over four years. “Oracle can accelerate profit growth by scaling capacity and converting its backlog,” the analysts wrote.

Not everyone agrees. Cracks in the AI narrative are beginning to emerge. Headlines about a possible AI bubble have begun to appear in response to reports of AI generating zero returns, and fears that companies will have to starting issuing debt to support outsize capital spending.

That would be a problem for Oracle. The company’s business largely hinges on AI: Oracle embeds AI into its software offerings and makes money renting out servers powered by Nvidia chips.

There have been murmurs about strained margins due to the cost of buying said chips, leading analysts to wonder just how much money Oracle can make from AI, and if the company’s good run will come to a halt.

Monness, Crespi, Hardt analysts reiterated a Neutral rating on Thursday, describing Oracle as “a high-quality company” with fresh growth opportunities driven by generative AI. “However, valuation is stretched, capex elevated, free cash flow negative, competition fierce, and the macro treacherous,” the firm wrote.

Will AI investments turn into profits? In Oracle’s case, maybe. But the question may be too big for analysts to answer definitively for now.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com