Oracle's Revenue Growth Potential Fueled by AI, Says Melius Research

Oracle's AI-Driven Growth Trajectory

• 💡 Melius Research reiterates a buy rating on Oracle, raising their price target to $370 from $270, citing significant revenue growth potential.
• 🚀 While Oracle's current guidance shows modest upside for this year, growth is projected to inflect dramatically in fiscal years 2028 through 2030, with estimates increasing from 19% to over 50% for FY28.
• 💰 This projected growth, especially in a market where SaaS companies are threatened by AI, is seen as a key driver for the stock, trading at under 30 times earnings for FY28.

The OpenAI and RPO Connection

• ⚠️ A significant risk identified is Oracle's reliance on OpenAI for its RPO (Remaining Performance Obligations) conversion to revenue, dependent on OpenAI securing funding and executing its projects.
• 🧩 The success of Oracle's growth hinges on OpenAI's stability and ability to thrive as an enterprise.

Inferencing as a New Revenue Engine

• 📈 The rapid growth in inferencing is described as a powerful "razor and blade" model, surpassing expectations for chip and cloud companies.
• 📊 This surge in inferencing demand is a major surprise, contributing to significant revenue streams beyond initial model training.
• 🌐 Industry leaders like Jensen Huang (Nvidia) and Hawk Tan (likely referring to a semiconductor executive) have indicated massive data center capex projections, underscoring the scale of this trend.
• ⚡ The "inferencing halo" effect is expected to be a powerful catalyst for companies that have made the right investments in cloud infrastructure.