Morgan Stanley Cuts Price Target on Oracle Amid Ongoing Uncertainty
Morgan Stanley lowered its price target on Oracle Corporation to $207 from $213 per share on Thursday, while maintaining an Equal Weight rating. The firm noted that improving execution and rising demand are being offset by lingering concerns around the cost structure and profitability of Oracle’s rapidly expanding GPU-as-a-service (GPUaaS) business.
Improved Execution but Key Questions Remain
According to analyst Keith Weiss, confidence in Oracle’s execution and demand trends has strengthened following its latest quarterly results. However, he emphasized that uncertainty still surrounds GPUaaS-related costs, financing strategies, and margin sustainability as the business scales.
Morgan Stanley also maintained a cautious stance on Oracle’s credit outlook, reflecting these unresolved issues.
Areas of Growing Optimism
Despite the concerns, the bank highlighted several areas where its outlook has improved. Strong GPUaaS capacity delivery during the third quarter prompted a significant upgrade to long-term earnings projections, with fiscal 2030 GPUaaS earnings estimates raised from $1.51 to $2.90 per share in the base scenario.
Additionally, Oracle’s cloud database segment is showing solid momentum. Revenue forecasts for fiscal 2027 and 2028 have been revised higher by 3% and 15%, respectively, implying a robust 41% compound annual growth rate between 2026 and 2028.
AI Demand and Core Business Strength
Morgan Stanley also pointed to reduced customer concentration risk, supported by strong demand for AI computing and new customer funding catalysts. At the same time, the company’s core earnings power—excluding GPUaaS—has been revised upward from $8.51 to $9.07 per share.
Major Challenges Still in Focus
However, several critical uncertainties remain. These include the total cost of Oracle’s planned 10-gigawatt infrastructure expansion, potential risks tied to project delivery timelines, and how the company will finance such an ambitious buildout.
Another key issue is the profitability of “bring your own hardware” agreements and how these will impact long-term margins as the GPUaaS segment grows.
Margin Pressure and Execution Risks
Oracle aims to bring more than 10 gigawatts of capacity online over the next three years, a strategy previously described as offering significant upside but leaving little room for execution errors. Meanwhile, non-GAAP gross margins disappointed in the third quarter and continued to trend lower, keeping margin trajectory a central concern for investors.
