Oracle upgraded to ‘Buy' on sustainable cloud momentum, says Stifel

Stifel upgraded Oracle (ORCL) to 'Buy' with a $250 price target, citing sustainable cloud revenue growth and strategic infrastructure investments. Analyst Brad Reback projects Oracle's total cloud revenue to grow in the high 30% range annually for the next two fiscal years, driving total revenue growth of 16% in FY26 and 20% in FY27. This disciplined capital expenditure strategy, prioritizing infrastructure over headcount, is expected to accelerate earnings growth by 2027, signaling a more scalable and profitable long-term trajectory for the company.

Analysis

Stifel has upgraded Oracle (ORCL) to 'Buy' and lifted its price target to $250, a move predicated on a robust and sustainable outlook for the company's cloud business. The core of this bullish thesis is the analyst's forecast for Oracle’s total cloud revenue to expand in the high 30% range annually over the next two fiscal years, a significant acceleration that is expected to drive total company revenue growth to approximately 16% in fiscal 2026 and 20% in fiscal 2027. This optimism is supported by Oracle's recent performance, including an 11% revenue jump in Q4 2025 and CEO Safra Catz's forward guidance indicating sustained momentum. A key strategic element is Oracle's increased capital expenditure on physical infrastructure, a pivot designed to generate scalable revenue growth that outpaces operating expenses. This is evidenced by last year's performance, where total revenue grew 8% while headcount and operating expenses rose by only 2% and 5%, respectively. While this capex-heavy strategy is expected to compress gross margins in the near term, it is projected to improve operating leverage and lead to accelerating earnings growth by 2027, signaling a strategic shift toward more profitable, less labor-dependent expansion.

Key Decisions for Investors

• Investors should view the Stifel upgrade as a strong validation of Oracle's cloud-centric strategy, with the $250 price target suggesting a potential 19% upside that warrants consideration for initiating or adding to long-term positions.
• Monitor quarterly reports for evidence that the high-capex strategy is translating into improved operating leverage, specifically tracking whether revenue growth continues to significantly outpace operating expense growth as projected for fiscal 2026 and 2027.
• Be prepared for near-term gross margin pressure as a direct result of increased infrastructure investment, but recognize this as a strategic trade-off for potentially accelerated earnings growth beginning in 2027.
• Given the stock's 26% year-to-date gain and the positive market reaction, investors should evaluate entry points carefully, weighing the strong fundamental outlook against recent price appreciation.