Barclays raised its price target on Oracle to $252 from $250 and kept an "Overweight" rating after the company's fiscal first-quarter results showed cloud infrastructure revenue up 121%. The bank pointed to a stronger funding picture and a $26 billion jump in contracted backlog as reasons for renewed confidence, even as Oracle's debt load keeps climbing.
Barclays raised its price target on Oracle (ORCL) to $252 from $250 and kept an "Overweight" rating, according to The Fly. The stock trades around $154, down 54% from its all-time high even after returning 335% to shareholders over the past decade in dividend-adjusted gains. Oracle's market cap stands at $465 billion.
Cloud infrastructure revenue jumps 121%
Oracle posted total revenue of $19.3 billion for its fiscal first quarter, up 30% year over year. It marked the first time Q1 revenue grew sequentially, a shift CFO Hilary Maxson called an important signal that the company is building infrastructure the right way. Cloud infrastructure revenue jumped 121% to $7.4 billion, while cloud apps grew 10%. Non-GAAP operating income rose 31% to $8.2 billion, and non-GAAP earnings per share came in at $1.92, up 30%.
Backlog growth and equity issuance support the case
Remaining performance obligations grew by $26 billion during the quarter, with most of the new backlog coming through prepayments or customers bringing their own hardware, so Oracle does not need extra cash to fund it. The company expects about half of its total backlog to convert into revenue over the next 36 months. Barclays also cited Oracle's completed $20 billion equity issuance during the quarter as improving its funding mix. Co-CEO Clay Magouyrk addressed data center delays in New Mexico and Wisconsin on the earnings call, saying neither site would affect the company's previously stated fiscal 2027 guidance, and noting that large projects come online in phases.
Debt keeps climbing as capital spending stays heavy
Oracle's balance sheet shows the strain of its buildout. Total debt has climbed to $155.9 billion on a trailing-twelve-month basis, up from $90.5 billion two years ago, with net debt at $118.9 billion. Free cash flow was negative $28.7 billion over the trailing twelve months on capital expenditures of $75.7 billion, and Maxson said full-year capital spending should land between $90 billion and $95 billion. Still, cash from operating activities hit a record $46.9 billion over the trailing twelve months. EBITDA covers interest expense by 6.6 times.
Oracle also raised its full-year revenue guidance to at least $90 billion, a 34% increase from the prior year, and lifted its non-GAAP EPS guidance to $8.10. For the second quarter, the company expects total revenue growth of 30% to 34%, with cloud revenue growth of 65% to 71%. GPU utilization stayed at 97.9% during the quarter, and Magouyrk said expiring capacity was resold at a 20% premium to prior contracts. Barclays' updated target reflects its view that Oracle has more room to run as it converts its growing backlog into revenue.
Source: TheStreet
Trading involves risk.
Risk Disclaimer
