Oracle's Stock: A Potential Reversal Amidst Funding Concerns?

Oppenheimer upgrades Oracle to Outperform with a $185 target, citing a record $523B backlog and cheap valuation, despite investor anxiety over a massive $50B capital raise plan.

After months of consistent decline, a major Wall Street voice has turned bullish on Oracle. Analysts at Oppenheimer have upgraded the technology giant's stock to an "Outperform" rating, attaching a price target of $185. Their rationale hinges on a valuation that has become compelling following the share price slump, coupled with a record-breaking backlog of orders fueled by artificial intelligence demand. However, the central question for investors remains whether the company can successfully navigate the significant financing strategy that has unsettled the market.

Record Backlog Contrasts with Share Performance

Despite the negative sentiment, Oracle's underlying business momentum appears strong. The company's remaining performance obligations—contractually secured revenue yet to be recognized—stand at a staggering $523 billion. This figure is approximately eight times its annual revenue. In the second fiscal quarter alone, deals with clients including Meta and Nvidia added $68 billion to this total.

The cloud infrastructure unit is a primary growth driver, expanding at over 34% currently with projections exceeding 70% growth for the 2026 fiscal year. Its client roster features other industry heavyweights such as OpenAI and TikTok.

Valuation Plummets to Annual Lows

The share price has been under severe pressure, having lost more than half its value since September 2025. Year-to-date, the decline totals 25%. Oppenheimer's Brian Schwartz views this sell-off as an opportunity. He notes that the price-to-earnings multiple has contracted from over 40 to just under 19, a level he believes presents an attractive risk-reward profile.

Schwartz characterizes Oracle as a "superior earnings growth value" stock. His base-case scenario forecasts a doubling of earnings per share by fiscal 2030, with a potential tripling in a more optimistic outlook.

A Massive Capital Raise Sparks Investor Anxiety

The dominant overhang on the stock is Oracle's announced financing plan. In early February, the company revealed its intention to raise between $45 and $50 billion in 2026. This would be achieved roughly half through equity instruments and the remainder via debt issuance. The proposed methods include convertible preferred shares and an equity distribution program for up to $20 billion.

This announcement caused immediate concern. It also followed legal action from bondholders, who filed a class-action lawsuit in January. The suit alleges that Oracle failed to disclose its substantial additional capital needs for AI infrastructure expansion when it issued $18 billion in bonds in September 2025.

OpenAI: A Double-Edged Sword

A specific point of investor nervousness is Oracle's substantial exposure to OpenAI, one of the largest consumers of its cloud capacity. Oppenheimer offers a reassuring perspective, noting that OpenAI has expanded its weekly user base to over 800 million and is, for the first time, building a dedicated sales team for enterprise customers. Furthermore, the AI firm is reportedly preparing a funding round of approximately $100 billion, which would bolster its financial stability and ability to fulfill its commitments.

The Persistent Cash Flow Challenge

Oracle's aggressive expansion comes at a significant cost. For the twelve months ending November 2025, the company reported a negative free cash flow of $13.18 billion. This reflects massive investment in data centers required to fulfill its enormous order book. While the core business demonstrates profitability with an operating margin of nearly 32%, the timeline for these investments to translate into positive cash flow remains uncertain.

The future trajectory of the share price will likely depend on Oracle's ability to execute its financing plan with discipline and to articulate a clear path to cash flow recovery. While Oppenheimer expresses confidence, the broader market is still awaiting concrete evidence.