Strong revenue projections allay worries about large AI bets, and Oracle rises

Shares of Oracle surged about 10 percent in premarket trading on Wednesday after the company issued a strong long-term revenue forecast, easing investor concerns about how quickly its heavy investments in artificial intelligence infrastructure will generate returns.

The software giant has been investing billions of dollars to build data centres and expand cloud capacity to support major partners such as OpenAI and Meta. At the same time, Oracle has been restructuring its workforce, relying on smaller, AI-assisted engineering teams and automation tools to develop software products for its traditional enterprise customers.

Oracle said it expects revenue to reach about $90 billion in fiscal 2027, significantly higher than analysts’ estimates of roughly $86.6 billion. The company also reported a sharp rise in remaining performance obligations (RPO) — a key indicator of contracted future revenue — which jumped 325 percent year-on-year to $553 billion in the third quarter. The figure also exceeded market expectations and rose from $523 billion reported in the previous quarter.

According to Matt Britzman of Hargreaves Lansdown, Oracle is increasingly seen by investors as a direct way to benefit from the global buildout of AI infrastructure. However, he cautioned that the company’s stock also carries higher risk because its growth outlook is closely tied to the momentum of the AI sector. If enthusiasm for AI were to slow, Oracle could face stronger downside pressure than many peers.

For the current fiscal fourth quarter, Oracle projected adjusted earnings between $1.96 and $2.00 per share, slightly above analysts’ average estimate of $1.94.

During the earnings call, Oracle co-founder and executive chairman Larry Ellison addressed investor concerns that AI-powered coding tools could reduce demand for traditional business software. Ellison argued that Oracle is actually benefiting from these technologies by using small engineering teams equipped with AI coding tools to develop new software-as-a-service (SaaS) products more efficiently.

The debate over whether artificial intelligence will disrupt the software industry intensified last month, when rapid advances in AI development tools triggered a sharp sell-off in technology and software stocks. Oracle’s shares have fallen about 23 percent so far this year despite the recent rally.

Analysts at Melius Research said Ellison’s comments were credible but noted that questions remain about whether AI tools could eventually affect software pricing or reduce the number of user licences companies require.

They added that investors are less worried about a potential “SaaS apocalypse” for Oracle and are more focused on execution risks, profit margins and the financing demands associated with expanding Oracle Cloud Infrastructure.

Oracle’s stock is currently trading at about 19.17 times its projected forward earnings over the next 12 months, compared with roughly 22.05 times for shares of Microsoft, highlighting how investors are valuing the company relative to other major cloud and software providers.