Barclays has reduced its price target for Oracle stock to $230 from $310, citing concerns that the company’s accelerating investment in artificial intelligence could place short-term pressure on profit margins.
According to Barclays analyst Raimo Lenschow, Oracle’s fiscal third-quarter results are expected to show strong AI-driven revenue growth. However, the rapid expansion of AI infrastructure may also weigh on margins in the near term due to the timing of upfront costs and large capital investments.
Lenschow noted that AI-related revenue could exceed market expectations, as additional computing capacity came online during the third quarter. He also pointed out that foreign exchange conditions have been more favorable than previously projected, which could provide some support to overall results.
Despite these positives, Barclays warned that gross margins and earnings per share (EPS) could face temporary headwinds. The firm highlighted that upfront investments and lease expenses tied to significant capacity expansions planned for the second half of calendar year 2026 may create negative timing effects on profitability.
Barclays believes these factors could divide investor sentiment. Supporters of the stock are likely to focus on Oracle’s growing momentum in AI and cloud infrastructure, while more cautious investors may concentrate on the pressure these investments place on margins.
The firm also emphasized that Oracle’s upcoming third-quarter report may not provide a definitive signal about the company’s long-term trajectory, as both growth opportunities and cost pressures are developing simultaneously.
Lenschow further argued that the market may be misinterpreting Oracle’s AI infrastructure strategy. He explained that many large contracts should be viewed as AI data center agreements structured similarly to project financing, rather than traditional technology investments.
This approach allows Oracle to adjust capacity expansion and project timelines more flexibly, reducing the need to commit large amounts of capital upfront.
Although sentiment toward several AI infrastructure companies has recently weakened, Barclays maintained its Overweight rating on Oracle stock, citing an attractive risk-reward profile as the company continues transforming its business around AI and cloud technologies.
