Oracle stock down 25% in 2026: why BofA sees 30% upside

Shares of Oracle are in focus after Bank of America reinstated coverage with a Buy rating and a $200 price target, pointing to strong long-term growth potential despite recent declines.

The stock traded 0.92% down at $145.78 and remained sharply below its 2025 peak of $345.72. 

The new price target implies roughly 30% upside from current levels, although it remains below broader Street estimates of $250 to $265.

Analyst Tal Liani described Oracle as "a giant going all-in on AI infrastructure and the cloud," framing the investment case around accelerating demand for artificial intelligence and cloud services.

Backlog growth underpins bullish thesis

A central pillar of Bank of America’s outlook is Oracle’s remaining performance obligations (RPO), which reached $553 billion in the latest quarter. 

The figure shows contracted future revenue, which rose 325% year over year and increased by $29 billion sequentially.

The company said much of the growth was driven by large-scale AI-related contracts. 

Many of these agreements involve customer prepayments or customer-supplied GPUs, reducing Oracle's need to raise additional capital to fulfil them.

Bank of America described the backlog as evidence of "large and visible revenue potential." 

Liani added that the firm’s view reflects "a balanced view of accelerating AI infrastructure demand against the timing, concentration, and capital requirements of Oracle's transformation."

The backlog has become a key metric for investors assessing Oracle’s transition toward AI-driven infrastructure and cloud services, offering visibility into future revenue streams.

Strong Q3 performance highlights momentum

Oracle’s third-quarter results for fiscal 2026 reinforced the growth narrative. 

The company reported total revenue of $17.2 billion, up 22% year over year, while cloud revenue rose 44% to $8.9 billion.

Cloud infrastructure revenue, closely tied to AI workloads, surged 84% to $4.9 billion. 

Non-GAAP earnings per share came in at $1.79, marking a 21% increase.

The quarter marked the first time in more than 15 years that both organic revenue and non-GAAP EPS grew by at least 20% simultaneously.

Oracle also raised its fiscal 2027 revenue target to $90 billion and reaffirmed its fiscal 2026 guidance of $67 billion. 

Management noted that demand for AI infrastructure continues to exceed supply, underscoring strong market tailwinds.

Execution risks and capital intensity remain

Despite the optimistic outlook, Bank of America highlighted several risks that could affect Oracle’s ability to deliver on its growth plans.

Capital expenditure is expected to rise significantly, with projections of around $50 billion in fiscal 2026 and continued increases through 2029. 

As a result, free cash flow is expected to remain negative over that period.

The bank also cautioned that converting backlog into actual revenue is not guaranteed, pointing to execution risk as a critical factor in the investment case. 

The long investment cycle required for AI infrastructure development could further delay returns.

Additionally, customer concentration remains a concern, with companies such as OpenAI accounting for a substantial portion of current obligations.

Oracle has already raised $30 billion through investment-grade bonds to support its AI buildout, with strong institutional demand for the offering.

Overall, Bank of America’s reinstatement reflects a view that while risks remain, much of the downside may already be priced in. 

The firm’s thesis hinges on Oracle’s ability to convert its massive backlog into revenue and scale its infrastructure fast enough to meet growing demand in the AI era.