Oracle Corp (NYSE:ORCL, ETR:ORC)’s recent deals represent a pivotal moment in its evolution as a hyperscaler, analysts at Jefferies believe.
The analyst repeated their ‘Buy’ rating on Oracle and upped their price target to $270 from $220, implying upside of 16% from levels at the time of writing.
The upgrade follows Oracle’s recent announcement of transformative cloud services agreements, including a landmark contract expected to generate more than $30 billion in annual revenue starting in fiscal 2028.
“The scale of these deals suggests meaningful upside to fiscal year 2028 IaaS/total revenue consensus estimates at $46 billion/$93 billion and de-risks the $104 billion financial year 2029 revenue target,” Jefferies wrote.
Jefferies views the developments as an inflection point for Oracle’s cloud strategy.
“These developments mark a significant inflection point in Oracle’s cloud strategy, potentially reshaping key investor debates around the durability of backlog growth, the timing of revenue inflection, and Oracle’s ability to monetize AI demand at scale,” they wrote.
While Oracle has not disclosed the customer tied to the $30 billion deal, media reports have named OpenAI as the customer as part of Project Stargate.
'Pivotal role'
Oracle also disclosed plans to lease 4.5 gigawatts of data center capacity to OpenAI, a move Jefferies wrote “underscores its pivotal role in scaling AI infrastructure.”
These mega-deals lend further support to Oracle’s guidance for 100% plus growth in remaining performance obligations (RPO) in fiscal 2026, they added.
“Recall that management indicated that ‘if Stargate turns out to be everything we think it is, then we’ve understated our RPO guide,’” the analysts wrote.
As of the end of fiscal 2025, Oracle reported $138 billion in total RPO, up 41% year-over-year, with cloud RPO comprising approximately 80% of that total. Jefferies expects the newly signed contracts to be included in FY26’s RPO figure, even though they will not yet impact revenue.
The $30 billion annual contract alone could represent a major portion of Oracle’s future growth.
“The consensus currently models $46 billion in IaaS revenue and $93 billion in total revenue for fiscal year 2028, suggesting that this single deal alone could account for over 65% of projected IaaS revenue and nearly one-third of total revenue in that year,” Jefferies noted.
Oracle shares traded hands at about $236 on Tuesday, having gained about 42% in the year to date. Jefferies believes the stock has more room to run.
“Oracle trades at a premium valuation of 41x calendar year 2026 GAAP EPS vs Microsoft at 31x,” they noted. “We think the premium valuation is justified by the acceleration in backlog growth and a now more concrete timeline for revenue inflection.”