Wall Street gave Oracle (ORCL) stock a reprieve from the dog house on Wednesday after the company reported better-than-expected third quarter results and revised its fiscal 2027 revenue higher to $90 billion.
Investors welcomed the news, with shares of Oracle rising as much as 14% in early trading Wednesday. Analysts took the improved 2027 outlook as a positive, though some also noted the risk that a chunk of Oracle’s fortunes is tied to OpenAI (OPAI.PVT).
“It is encouraging that Oracle is building a more diversified pipeline of cloud and AI deals in the enterprise in our view,” BofA Global Research analyst Brad Sills wrote in a note to investors following Oracle’s earnings announcement.
“However, there was little update on the large OpenAI contract,” he said. “Uncertainty remains as to the timing of delivery and serviceability of this key contract.”
William Blair analyst Sebastien Naji offered a similar take on the risk posed by Oracle’s OpenAI contract.
“Risks to our rating include customer concentration (with OpenAI representing more than $300 billion of [remaining performance obligations (RPO)]); weaker-than-expected performance from Oracle’s cloud and autonomous database products; increased competition across database, application, and cloud businesses; and lower-than-expected margins and free cash flow,” he wrote in a note.
Read more about Oracle’s stock moves and today’s market action.
For the third quarter, Oracle said it had $523 billion in RPO, up $29 billion from the prior quarter. That means it has contracts for $523 billion that it must complete before it can get paid out by its customers. Outside of the OpenAI question, however, analysts see Oracle’s quarter as a win.
The company saw earnings per share (EPS) of $1.79 on revenue of $17.19 billion, above EPS expectations of $1.70 and revenue estimates of $16.9 billion.
Oracle’s cloud segment brought in $8.9 billion versus an anticipated $8.8 billion, while cloud infrastructure sales of $4.9 billion topped expectations of $4.74 billion.
“The $30 billion incremental RPO … and raised FY27 revenue outlook point to solid demand for both AI infrastructure and legacy cloud services,” Sills wrote.
Oracle also noted in its earnings release that it won’t have to increase capital expenditures to pay for the infrastructure necessary for its RPO contracts, saying that “most of the equipment needed is either funded upfront via customer prepayments so Oracle can purchase the GPUs, or the customer buys the GPUs and supplies them to Oracle.”