Oracle shares (NYSE: ORCL) fell 5.23% to $141.32 yesterday, amid a broader technology selloff, and are continuing on in the same vein this morning, a further 1.64% lower in the pre-market. The move comes as Jefferies analyst Brent Thill lowered his price target on ORCL to $290 from $320 while maintaining a Buy rating, framing the move as a reset of expectations rather than a loss of conviction in the software giant’s long-term prospects.
The call lands at a delicate moment, with Oracle heading into what Thill concedes is a seasonally weak quarterly report just as a credit downgrade, planned job cuts and the soaring cost of its artificial intelligence build-out have pushed sentiment toward historic lows.
When Jefferies delivered its previous reduction in March, lowering the target from $400 to $320, the shares were changing hands near $154.79, already down 45% from that 52-week high and 34% over six months. Even after the latest trim, the $290 target implies the stock could more than double from recent levels, a sign of how sharply expectations have been reset in both directions.
Second Target Cut of 2026, Yet Bullish Tone Persists
The revision is Jefferies’ second cut of 2026 and reflects more conservative assumptions around contributions from OpenAI-related business and margins. Yet Thill told clients he likes the share setup heading into Oracle’s fiscal first-quarter report, arguing that with sentiment near its most negative extreme, most of the bad news is already reflected in the price. His thesis hinges on an inflection in cloud growth and a pickup in software-as-a-service momentum.
The underlying numbers give that argument some support. In its fiscal 2026 first quarter, Oracle reported revenue of $14.9 billion, up 12% year over year, with cloud revenue up roughly 28% and cloud infrastructure revenue climbing about 55%. Remaining performance obligations, business contracted but not yet recognized as revenue, surged 359% to approximately $455 billion, one of the largest backlogs in enterprise software.
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Multicloud database revenue generated through partnerships with Amazon, Google and Microsoft grew more than 1,500% in a single quarter. Management has guided for Oracle Cloud Infrastructure revenue to rise roughly 77% to about $18 billion in fiscal 2026, and has sketched a long-term trajectory toward $32 billion, $73 billion, $114 billion and eventually $144 billion in subsequent years.
Demand commitments are equally eye-catching. Oracle holds a $300 billion, five-year contract with OpenAI and is a central participant in Stargate, the $500 billion AI infrastructure initiative backed by OpenAI and SoftBank.
Costs Weigh on Sentiment
The cost of capturing that demand, however, is what has rattled markets. Oracle plans more than $50 billion in AI infrastructure capital expenditure in fiscal 2026, and its reported $55.7 billion of data center spending has outstripped current cash flow. The company carries more than $100 billion of total debt and generated negative free cash flow of roughly $10 billion as of its fiscal second quarter.
S&P Global has cut Oracle’s credit rating to the lowest tier of investment grade, and reports indicate the company plans to eliminate 7,000 to 10,000 jobs, with payroll reductions taking effect before September, as it leans on automation to contain costs. To bridge the funding gap, Oracle expects to raise $45 billion to $50 billion in gross proceeds in 2026 through investment-grade bonds and equity-linked instruments; free cash flow is not expected to turn positive until fiscal 2029, and Thill has cautioned that further raises are likely in calendar 2027 and beyond.
The company has continued to invest in its franchise through the turbulence, recently launching an AI-enabled advisor for the construction and engineering industry and extending its title partnership with Oracle Red Bull Racing.
What Next?
In his research note, Thill described the approaching quarter as “seasonally soft” but argued that a cloud growth inflection and an uptick in SaaS “could dispel some of the bear thesis.” He has characterized Oracle’s spending as building for “demand that is here and now,” rejecting the suggestion that the company is erecting speculative capacity.
Oracle heads towards earnings next week with one of the deepest contracted backlogs in the industry set against one of its heaviest spending programs. Down 37.27% over the past 12 months, and 57% off the high close in September of last year points to a market that is not willing to buy in against the current backdrop. Whether the results confirm Jefferies’ view that pessimism has overshot, or validate concerns about leverage and execution, will likely determine whether the shares’ long slide finally finds a floor.
