Oracle’s (ORCL) Cloud Business Set to Grow 14x by 2030, UBS Says

UBS analyst Karl Keirstead raised Oracle's price target to $360 with a Buy rating, driven by a disclosed $317 billion incremental backlog. This backlog is projected to propel Oracle's cloud infrastructure segment from $10 billion in FY25 to $144 billion in FY30, with a significant portion reportedly stemming from a $300 billion, five-year contract with OpenAI, alongside contributions from xAI and Meta. The substantial backlog and customer diversification led UBS to sharply increase FY29 revenue and EPS estimates, enhancing the stock's growth outlook and risk profile.

Analysis

Oracle's investment profile has been significantly upgraded following a UBS price target revision to $360.00 from $280.00, supported by a 'Buy' rating. The primary catalyst is the disclosure of a $317 billion incremental backlog, which underpins a forecast for its cloud infrastructure segment to grow 14-fold, from $10 billion in fiscal year 2025 to $144 billion by fiscal year 2030. A substantial portion of this backlog is reportedly a $300 billion, five-year computing power contract with OpenAI, with additional contributions assumed from xAI and Meta. While this customer diversity is viewed as reducing the stock's risk profile, concentration with OpenAI remains a key factor. Further bolstering the bull case is Oracle's guidance for mid-teens operating income growth in FY26, well ahead of an 8% analyst model, suggesting tight operational expense control. Consequently, UBS has sharply raised its FY29 estimates, projecting revenue of $163 billion and non-GAAP EPS of $13.98, though it has slightly lowered its operating margin forecast to 37% to account for potential cannibalization of on-premise database revenue as customers migrate to the cloud.

Key Decisions for Investors

• Investors should re-evaluate valuation models for Oracle, as the $317 billion incremental backlog and projected 14x growth in cloud infrastructure fundamentally alter the company's long-term revenue and earnings trajectory.
• Monitor for disclosures confirming the customer mix within the backlog to assess concentration risk, particularly with OpenAI, and track on-premise database support revenue trends for signs of cannibalization.
• Consider the company's ability to execute on this massive backlog while maintaining cost discipline, as the positive FY26 operating income guidance will be a critical metric to watch for realizing projected EPS growth.