- Mizuho reiterated its Outperform rating and $320 price target on Oracle after the company’s fourth-quarter results.
- Oracle’s cloud infrastructure business is growing quickly, but investors are focused on capital spending, debt, and free cash flow.
- The bigger question is whether the demand for Oracle’s artificial intelligence cloud can grow fast enough to justify the cost of building it.
Oracle (ORCL) shares fell 5% Monday to close at $175.07, even after a Wall Street analyst delivered a bullish message on the company’s artificial intelligence cloud business.
Mizuho reiterated its Outperform rating and $320 price target on Oracle following the company’s fourth-quarter results, according to Investing.com. The call reflects a growing debate on Wall Street around Oracle: the company is becoming one of the more important non-Mag 7 players in the AI infrastructure race, but that shift is expensive.
The issue for investors is no longer just whether Oracle can find demand for its cloud capacity. Its remaining performance obligations have surged, cloud infrastructure revenue is growing sharply, and large AI customers are signing up for more computing power.
The harder question is whether Oracle can build enough data-center capacity without putting too much pressure on its balance sheet, cash flow, and margins.
Oracle gets bullish Wall Street call after cloud surge
Mizuho’s bullish view followed a quarter that showed how quickly Oracle’s business is shifting toward cloud infrastructure.
Oracle said in a company statement that its total revenue rose 21% to $19.2 billion in the fourth quarter. Total cloud revenue increased 47% to $9.9 billion, while cloud infrastructure revenue jumped 93% to $5.8 billion. Non-GAAP earnings per share grew 24% to $2.11.
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Those numbers help explain why analysts remain interested in Oracle’s AI story. The company has long been known for databases and enterprise software, but demand for AI is turning it into a larger player in cloud infrastructure.
Mizuho said Oracle’s Infrastructure as a Service revenue accelerated by more than 90% year over year as the Abilene supercluster and new capacity came online on schedule, according to Investing.com.
Oracle’s backlog also gives analysts a clear figure to point to. The company reported that its remaining performance obligations, or RPO, ended the quarter at $638 billion, up 363% from a year earlier and $85 billion from the end of the third quarter.
RPO represents contracted revenue that has not yet been recognized. For Oracle, it has become one of the clearest signs that customers want cloud capacity, especially for AI workloads.
But it also creates a new problem. The company has to spend heavily before all that future revenue becomes current revenue.
Oracle’s AI spending creates the bigger investor test
Oracle’s cloud buildout is becoming one of the market’s clearest examples of the cost behind the AI boom.
The company said that it raised $43 billion in debt financing and $5 billion in equity financing in fiscal 2026. It also expects to raise about $40 billion through debt and equity financing in fiscal 2027, including its previously announced $20 billion at-the-market equity issuance.
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That is why the stock has been under pressure even as the company reports strong cloud growth.
Reuters reported earlier this month that Oracle shares tumbled after investors focused on rising spending and a larger debt load tied to its AI infrastructure push.
Oracle’s accelerated data center buildout is pressuring near-term gross margins and raising investor questions around CapEx, funding, and returns.
Citizens JMP Securities said, according to Reuters.
The concern is simple: AI data centers require huge upfront investments in chips, power, land, cooling, and networking equipment. Larger cloud rivals such as Amazon (AMZN) and Microsoft (MSFT) have massive cash flows to fund that spending. Oracle is trying to scale quickly, but it does not have the same financial cushion.
Reuters reported that Oracle expects about $70 billion in net capital expenditures in its current fiscal year as it accelerates AI data-center development for customers, including OpenAI. The company is also competing with larger cloud providers while trying to protect margins and manage financing costs.
Victor Golmer / Getty Images
What investors are watching
Investors are likely to focus on several numbers as Oracle tries to prove its AI strategy can work:
- Cloud Infrastructure revenue growth
- Remaining performance obligations
- Capital spending
- Free cash flow
- Debt and equity financing
- Customer prepayments
- Fiscal 2027 revenue guidance
The most important figure may be free cash flow.
Oracle said operating cash flow increased 54% to $32 billion in fiscal 2026, but free cash flow was negative $23.7 billion as the company continued investing in cloud infrastructure.
That is the trade-off at the center of the stock. Oracle has a large AI cloud opportunity, but it has to spend aggressively to capture it.
Reuters Breakingviews described the shift as a move from a longtime software vendor into a provider of computing power for AI models. It also noted that Oracle’s capital spending has risen sharply compared with the years before the AI buildout.
For bullish analysts, that spending is necessary. If Oracle can turn its AI backlog into revenue, the company could become a much larger cloud infrastructure player.
Mizuho also sees Oracle’s bring-your-own-cloud and prepayment model helping the company reach a point where it can self-fund its growth, according to Investing.com.
For cautious investors, the risk is that Oracle’s AI opportunity comes with too much financial pressure before the payoff becomes clear.
Oracle’s AI boom leaves investors with one question
Oracle has already shown that demand is not the problem.
The company’s cloud infrastructure revenue is rising quickly, its RPO balance is expanding, and analysts remain bullish on the stock. Mizuho’s $320 target reflects confidence that Oracle can remain a major beneficiary of AI infrastructure spending.
But the market is also asking a more practical question: how much will that growth cost?
If Oracle can convert its backlog into revenue while keeping financing needs under control, the AI cloud buildout could support the bull case. If spending, debt, and free cash flow pressure continue to dominate the story, investors may continue to treat Oracle’s AI opportunity as both a growth engine and a financial risk.
For now, the stock is not just a cloud growth story. It is a test of whether one of the largest non-Mag 7 AI infrastructure bets can pay for itself.
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