Oracle Corporation (ORCL.US) ambitious goals have received positive evaluations from analysts, but customer concentration risks are still a concern.

Oracle Corporation (ORCL.US) recently held an "Analyst Day" event and announced ambitious long-term financial goals. Behind these goals is the continuous rise in demand for artificial intelligence (AI) applications and infrastructure. This plan has received widespread positive feedback from analysts, with Goldman Sachs Group, Inc., and Piper Sandler both releasing reports and raising their target prices. During the "Analyst Day," Oracle Corporation announced its long-term financial goals for the fiscal year 2030 (FY30): an estimated annual total revenue of $225 billion, corresponding to a five-year compound annual growth rate (CAGR) of 31%; and a diluted earnings per share (EPS) target of $21, with a five-year CAGR of 28%. The revenue target for Oracle Corporation's core growth engine, the Oracle Cloud Infrastructure (OCI) business, was raised from $144 billion to $166 billion, accounting for nearly 75% of its total revenue, an increase of over 15%. Oracle Corporation Co-CEO Clay Magouyrk also revealed details of the gross margin of the AI data center GPU computing sales business: "For example, let's say a customer wants to purchase around 1 gigawatt of GPU accelerators, what would the situation be like?" Magouyrk said. "If the customer signs a 6-year contract, calculated at $100 billion per year, the Total Contract Value (TCV) will reach $600 billion." He further broke down the cost structure: "I divide the costs into two parts. The first part I call 'Site, Data Center, and Power Costs,' which obviously includes building facilities, actual power generation costs, and the labor costs required to operate this business - this part of the cost ultimately accounts for about 35% of the total cost of service delivery." Magouyrk added, "The second part is the computing, network, and storage costs, which are all the equipment costs deployed inside the data center, accounting for about 65% of the total cost... but it is important to note that the 35% gross margin I mentioned does not only cover the operation costs after the first year. This 35% gross margin actually includes the initial start-up costs." "Obviously, as you can imagine, if we consider the first year of business startup as a turning point, we will incur expenses before the startup, but at this point, we have not yet obtained corresponding revenue. And this situation will occur in multiple project locations - we are not only building one such data center, but are concurrently advancing the construction of 10, 20 projects." Multiple major banks are "bullish," while some analysts warn of risks Piper Sandler analysts Hannah Rudoff and J.R. Herrera, in an investor report released last Friday, stated, "Oracle Corporation's highly anticipated Analyst Day event revealed updated long-term targets, including reaching $225 billion in revenue for fiscal year 2030, which implies a five-year compound annual growth rate (CAGR) of 31%, higher than our previous estimate of around 20%." The report further explains, "The core supporting this target is the strong growth expectations of the cloud infrastructure business: the five-year operating cash flow (OCI) CAGR of this business is estimated to reach 75%, pushing its fiscal year 2030 revenue scale to $166 billion (an increase from the previous estimate of $144 billion)." Based on these assessments, Piper Sandler reiterated its "overweight" rating on Oracle Corporation and raised the target price from $330 to $380. In addition to Piper Sandler, Guggenheim also raised its target price for Oracle Corporation from $375 to $400; T.D. Cowen also raised its target price from $375 to $400. However, analyst Kevin Anthony D. Arroyo points out that there are still risks for Oracle Corporation to achieve these high targets. Specifically, the company's business is overly dependent on OpenAI - about two-thirds of Oracle Corporation's nearly $500 billion in unfilled orders come from this startup led by Sam Altman. Arroyo emphasized, "This brings significant customer concentration risk to Oracle Corporation, especially considering that OpenAI is still not profitable." In an analysis report released last Thursday, he further explained, "According to the agreement, OpenAI will reach a 'Infrastructure Lease' cooperation model with Oracle Corporation Cloud Infrastructure (OCI). For OpenAI, this means expenditures of about $600 billion per year; if calculated according to a five-year agreement, the total amount will reach $3 trillion, and the agreement will take effect in 2027. However, the question is, how will OpenAI pay for these expenses, or even maintain this cooperation?" Goldman Sachs Group, Inc. gives a "neutral" rating, raises target price to $320 Goldman Sachs Group, Inc. released a research report on Oracle Corporation on October 17, reiterating a "neutral" rating and raising the 12-month target price from $310 to $320. As of the close of October 16, 2025, Oracle Corporation's stock price was $313, implying a potential upside of only 2.2% from the target price. The report notes that Oracle Corporation's long-term growth targets are attractive, but uncertainties in execution and financial risks have resulted in a balanced risk-return profile, hence the maintenance of a neutral rating. Oracle Corporation presented a positive outlook for the future during the Analyst Day. In the short term, Goldman Sachs Group, Inc. also has specific forecasts for Oracle Corporation's financial performance from the fiscal years 2025 to 2028: total revenue is expected to gradually increase from $57.399 billion in fiscal year 2025 to $115.583 billion in fiscal year 2028; diluted EPS will increase from $6.03 to $10.05, but the gross margin will show a downward trend, from 72.0% to 58.1%, reflecting cost pressures during business expansion. Goldman Sachs Group, Inc. states that the OCI business is a key support for Oracle Corporation's long-term goals and analyzes it from three aspects: growth drivers, customer expansion, and segment performance. In terms of growth drivers, the explosion of demand for AI infrastructure is crucial - OCI, with its Acceleron network architecture (equipped with specialized Ethernet cards), can deploy large-scale AI GPU clusters more efficiently, reducing costs, and meeting the market's demand for AI training and inference. In terms of customer expansion, Oracle Corporation made a breakthrough in the second quarter of fiscal year 2025 (F2Q), adding 4 non-OpenAI customers (including Meta), with a total contract value (TCV) of the infrastructure business reaching $65 billion, effectively alleviating the previous reliance on a single customer. In terms of segment performance, all four OCI sectors achieved high growth: AI Infrastructure had the highest year-on-year growth rate of 117%, with a gross margin of 30-40%; Distributed Cloud grew by 77%, with a gross margin of 40-60%; Cloud Natives grew by 49%, with a gross margin of 40-60%; and Enterprise business grew by 33%, with a gross margin of 65-80%, being the most profitable segment. In addition, the report also reveals the cost structure of typical OCI contracts (such as a 6-year $600 billion TCV AI infrastructure order): land, data center, and power costs account for 35% of the total cost (including startup costs), while computing, network, and storage costs account for 65%, with an overall gross margin of approximately 35%. Apart from OCI, Goldman Sachs Group, Inc. believes that Oracle Corporation's AI and Agent ecosystem and SaaS full-stack strategy also constitute important growth supplements. In the AI field, Oracle Corporation has deployed over 600 Agents (including over 400 for Fusion ERP and over 200 for vertical industries). If we include Agents developed by customers and partners, the actual scale is even larger; at the implementation level, 2,400 customers have activated industry AI Agents within 18 months, with deployment cycles of only a few days and no need for professional services or training. In the SaaS field, Oracle Corporation promotes a "database + data platform + OCI" full-stack architecture, with customers using this architecture having an annual recurring revenue (ARR) 150 times higher than customers using a single product; the company plans to expand the Universal Credits model from OCI to the application layer, further lowering the barrier for customers to use AI applications and driving business penetration. The report also emphasizes four core risks facing Oracle Corporation, which are key reasons for maintaining a neutral rating. First is execution risk, where uncertainties in data center construction cycles, GPU procurement volumes and pricing, and energy costs after fiscal year 2027 may affect business delivery schedules. Second is customer concentration risk, with about two-thirds of Oracle Corporation's nearly $500 billion in unfilled orders coming from the as yet unprofitable OpenAI, and their agreement for a $3 trillion infrastructure leasing (effective from 2027) has hidden risks in payment ability and sustainability. Third is financial pressure, with high capital expenditure (CapEx) leading to a negative free cash flow forecast for fiscal years 2026-2028, which will drag down EPS growth and release of operating leverage. Fourth is market competition risk, where Oracle Corporation has been consistently losing market share in the database market over the past decade, and its IaaS business market share ranks fourth, lagging behind AWS, Azure, and GCP, among other leading companies.