Oracle could be 'nearing the end' of its need to raise cash, a Bernstein analyst says

Bernstein analyst Mark Moerdler has a $325 target price on Oracle shares.

Oracle's stock is "extremely controversial" and "volatile," in the words of a Bernstein analyst, and the company is one of the most complex businesses in software. But shares could finally be primed to break out in a major way.

Bernstein's Mark Moerdler wrote in a Wednesday note that investors have concerns about the company's profitability and ability to meet the cash requirements needed to fund its long-term and noncancelable contract commitments. The good news is that the company is likely "nearing the end of their need for additional cash," he noted.

He sees Oracle (ORCL) in the "early days" of an investment phase that will drive an acceleration in revenue and profits. His $325 price target implies room for the stock to more than double off its current level of $145.30.

Shares of Oracle are up nearly 3% in morning action on Wednesday.

Oracle has generated controversy over its heavy capital expenditures and the debt it's taken on to support its AI expansion. While growth in Oracle's cloud infrastructure segment has impressed investors, some remain concerned about the financing behind the company's plans for $95 billion in capital expenditures in the fiscal 2027 year that runs from June 1 through May 31.

In the 2026 fiscal year, Oracle has raised $43 billion in debt financing. In the 2027 fiscal year, the company expects to raise roughly $40 billion through a combination of debt and equity.

Moreover, given the company's products and offerings are at different stages of maturity, growth and decline, it's been challenging for investors to nail down the company's prospects given its complex structure, Moerdler wrote.

One factor driving Moerdler's bullishness is that Oracle's cloud infrastructure segment is continuing to outgrow its hyperscaler peers, meaning Microsoft's Azure segment (MSFT), Google's (GOOGL) (GOOG) cloud business and Amazon.com's (AMZN) AWS.

In the most recent fiscal fourth quarter, Oracle posted 93% growth in constant currency for its cloud segment, known as OCI. For the 2027 fiscal year, he expects an acceleration in growth of OCI, noting that the business is growing faster on a year-over-year basis than overall revenue is.

While investors often recognize OCI's growth prospects, "understanding the rest of the company and its ability to fund investment and drive profits are critical whether you are a bull or a bear," he wrote.

"In virtually every conversation we have on [Oracle], our clients are interested in not simply what is driving current numbers but getting a sense of how the business will evolve over time as they build all the AI data center capacity" to fulfill remaining performance obligations, Moerdler explained.

Investors have generally been concerned over the company's $638 billion in remaining performance obligations, or backlog, and how quickly it can be converted to revenue.

Another key to Moerdler's thesis lies in the composition of Oracle's revenue. He notes that lower growth areas such as the company's license segment are declining each fiscal year, while the company's high-growth software-as-a-service segment, which includes products such as Fusion and NetSuite along with OCI, and are becoming an increasingly larger portion of software revenue.

Investors can expect to get more details when the company reports earnings for the fiscal first quarter on September 8.

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-Hannah Pedone