According to some analysts, Oracle Corp.’s announcement last week of a number of significant cloud-services agreements marks “a pivotal moment” in the company’s evolution into a hyperscale cloud power and should reassure investors about the company’s capacity to generate high-rate revenue growth in the long term.
Oracle (ORCL) announced last week in a regulatory filing that it had inked several significant agreements, one of which is expected to generate over $30 billion in revenue annually beginning in fiscal year 2028. In a note to clients on Tuesday, analysts at Jefferies led by Brent Thill stated that the cloud provider “remains a standout” among large-cap software companies because it is the only one on track to both accelerate its revenue growth and deliver more than 100% growth in remaining performance obligations (RPO), or future revenue that it should receive from existing contracts.
View more: Oracle is a contentious stock because of its success in the cloud. This is the most recent point of contention.
Although the corporation does not reveal the identity of its $30 billion annual client, there is conjecture that it may be related to President Donald Trump’s $500 billion Stargate project for artificial intelligence data centers and infrastructure, which was revealed earlier this year. The joint venture includes Japan’s SoftBank Group Corp. (JP:9984), Oracle, and AI startup OpenAI. According to Bloomberg, Oracle is also renting the AI startup 4.5 gigawatts of data center power.
“These developments mark a significant inflection point in [Oracle’s] cloud strategy, potentially reshaping key investor debates around the durability of backlog growth, the timing of revenue inflection, and [Oracle’s] ability to monetize AI demand at scale,” the analysts at Jefferies said.
Given the size and timing of the transactions, analysts are optimistic that Oracle will reach its growth objective of more than 100% for RPO in fiscal year 2026. The analysts stated that the purchases “strengthen its positioning as a hyperscaler capable of winning mega-deals” and enhance Oracle’s long-term visibility into sales trends, even if they won’t affect revenue in fiscal year 2026.
See more: These are the main causes of Oracle’s stock rising.
Following the deals, the Jefferies team believes there will be “meaningful upside” to projections for Oracle’s cloud revenue and long-term goals. According to analysts, Wall Street currently projects that the cloud giant will make $46 billion in infrastructure-as-a-service revenue in fiscal year 2028, while total revenue predictions are $93 billion. They claimed that the $30 billion contract alone may account for over a third of total revenue for that fiscal year and more than 65% of the anticipated IaaS revenue.
The analysts stated, “The visibility and magnitude of these commitments significantly de-risk Oracle’s FY29 [revenue] target of $104B,” implying that the aim now appears safer, even though the full ramp is still several years ahead.
Jefferies anticipates that the company will strengthen its long-term financial structure at its next analyst day.
