Oracle Corporation (NYSE: ORCL) saw its stock decline over 3% on March 11, trading at $143.21 at press time, after the company’s third-quarter earnings for Fiscal Year 2025 fell short of analyst expectations.
Despite strong cloud growth and record-breaking contract signings, investors reacted to weaker-than-expected guidance for the upcoming quarter, raising concerns about margin pressures and capital expenditures.
Earnings miss despite strong cloud performance
Oracle reported adjusted earnings per share (EPS) of $1.47, missing Wall Street’s forecast of $1.49. Revenue came in at $14.13 billion, below the expected $14.39 billion.
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Despite the earnings miss, total revenue grew 8% year-over-year, with cloud services and license support revenue rising 12% to $11 billion.
The company’s Infrastructure-as-a-Service (IaaS) segment remained a key driver of growth, surging 51% year-over-year to $2.7 billion.
Oracle’s cloud database services also saw strong demand, growing 28% annually, while AI-related GPU consumption revenue more than tripled, indicating the company’s expanding footprint in AI-driven computing.
Record-breaking cloud contracts and AI expansion
Oracle reported $48 billion in new contracts in Q3, pushing its Remaining Performance Obligations (RPO) to over $130 billion—a 63% year-over-year increase.
Notably, this figure excludes contracts from Project Stargate, an AI infrastructure initiative OpenAI, Nvidia, and SoftBank
Moreover, Oracle’s multi-cloud business with Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOGL), and Microsoft (NASDAQ: MSFT) expanded 200% in just three months, while the company secured a multi-billion-dollar deal with AMD (NASDAQ: AMD) to build a 30,000-GPU AI cluster.
Weaker outlook raises concerns
Despite these record-breaking cloud deals, Oracle’s Q4 guidance fell short of expectations, sparking investor concern. The company expects revenue growth of 8% to 10%, missing analysts’ forecast of 11%, while adjusted EPS guidance of $1.61 to $1.65 fell short of the consensus estimate of $1.79.
Oracle also plans to spend $16 billion in CapEx this year, more than double last year’s total, as it expands data center capacity to support growing AI demand.
While CEO Safra Catz emphasized that CapEx investments remain aligned with booking trends, analysts have raised concerns about margin pressures and the return on investment.
Analyst revise Oracle stock price targets
Following the earnings release, several analysts lowered their price targets on Oracle, citing concerns about slower revenue acceleration and margin pressures.
Bank of America lowered its price target to $175 from $195, citing concerns over margin pressures and CapEx efficiency.
While cloud growth could drive revenue acceleration, the firm noted that Oracle’s reliance on database migration and GPU rentals makes the extent of its reacceleration uncertain. Moreover, BofA compared Oracle’s operating income growth projections to those of hyperscalers, pointing out that the company’s expected 8% growth in FY26 and 13% in FY27 does not sufficiently justify its high capital expenditures.
Similarly, BMO Capital slashed its price target to $175 from $205, maintaining a ‘Market Perform’ rating following the company’s Q3 earnings miss and weaker-than-expected guidance. The firm reiterated its previous view that FY26 margins will decline due to higher depreciation costs.
While uncertainty remains over FY27 margin expansion, BMO remains optimistic about Oracle’s long-term growth trajectory, citing the potential for revenue reacceleration as a key driver of future stock performance.
Piper Sandler also trimmed its price target to $190 from $210, maintaining an ‘Overweight’ rating. The firm noted that Oracle’s record RPO backlog suggests no signs of slowing AI demand. The firm remains optimistic that Oracle can sustain double-digit EPS growth through expanding revenue and stock buybacks.
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