Oracle shares ORCL rose more than 11% on Wednesday after the company reaffirmed its fiscal 2027 outlook and issued long-term financial targets, offering investors greater clarity on the expected returns from its artificial intelligence infrastructure spending.
At its financial analyst day in Las Vegas, the cloud and database company said it expects revenue of at least $90 billion and adjusted earnings of $8.10 per share for fiscal 2027.
Analysts had expected earnings of $8.14 per share and revenue of $90.45 billion.
Oracle also outlined its ambition to expand revenue significantly over the next several years, while forecasting a return to positive free cash flow as capital expenditure begins to decline.
The outlook comes as investors scrutinise the company’s substantial investment in AI data centres and its ability to finance expansion while meeting its financial commitments.
Oracle targets $225B revenue by fiscal 2030
Oracle expects revenue to grow at a compound annual growth rate of 35% between fiscal 2026 and fiscal 2030, reaching at least $225 billion in the final year.
The figure was higher than the $217.7 billion figure expected by Wall Street analysts according to FactSet data.
For fiscal 2030, the company also forecast adjusted operating margins above 40% and adjusted earnings of more than $21 per share.
The targets reflect Oracle’s efforts to expand beyond its traditional database software business and become a major provider of computing infrastructure for AI workloads.
The company is building data centres to serve OpenAI and other customers, placing it at the centre of growing demand for AI computing capacity.
However, the scale of this expansion has raised concerns about the costs involved and the time required to generate sufficient cash returns.
Oracle also faces scrutiny over its reliance on OpenAI, a loss-making customer, as it expands its infrastructure business.
Free cash flow expected to turn positive in fiscal 2028
Chief Financial Officer Hilary Maxson said Oracle expects free cash flow to turn positive in the second half of fiscal 2028 and exceed $30 billion in fiscal 2029.
The projection is more favourable than market expectations.
Investors had anticipated that free cash flow would remain negative in fiscal 2029, according to Bloomberg data.
Oracle expects capital spending to peak between fiscal 2027 and fiscal 2028 before slowing in fiscal 2029.
The company said the reduction in spending would help it generate more cash internally.
Maxson said Oracle expects to begin self-funding its growth in fiscal 2029, potentially reducing its reliance on external financing as its AI infrastructure investments mature.
The forecast is significant because the company’s spending requirements have become a central concern for investors assessing whether its AI expansion can produce sustainable financial returns.
Oracle limits planned capital raises to $20B
Oracle said it expects to raise $20 billion from capital markets between fiscal 2027 and fiscal 2030, excluding refinancing.
The planned amount comprises $10 billion in equity and $10 billion in debt.
The company also expects vendor financing, customer-provided hardware and prepayments to reduce its upfront cash requirements.
These arrangements could help Oracle manage the funding demands associated with its data-centre expansion while limiting additional capital raises.
The company’s ability to control financing needs and generate cash will remain important as it pursues its long-term revenue targets.
The post Why is Oracle stock surging 11% today? appeared first on Invezz
