Oracle’s $225 Price Call Depends on Turning AI Backlog Into Cash

Oracle could climb to $225 a share, about 51% above the $148.84 price used in a September 22 analysis by 24/7 Wall St. The publication’s model puts its base case near $217, while the $225 target assumes Oracle can sustain rapid AI-cloud growth and improve investor confidence.

The bullish case has a large contract pipeline behind it. Oracle reported fiscal first-quarter revenue of $19.3 billion, up 30% from a year earlier. Cloud infrastructure revenue rose 121% to $7.4 billion, according to the company’s September 10 results.

Oracle’s remaining performance obligations, or contracted revenue not yet recognized, reached $664 billion. The company said it signed more than $30 billion in additional AI cloud contracts during the quarter, lifting that backlog by $209 billion year over year.

But contracts are not the same as cash already earned. Oracle generated $23.1 billion in operating cash flow in the quarter, yet spent $28.5 billion on capital investments. Free cash flow, the cash left after those investments, was negative $5.4 billion.

That spending is central to the stock’s risk. Oracle’s interest expense rose 55% year over year to $1.4 billion, while the company also completed a $20 billion common-stock sale during the quarter. Investors will weigh the added funding against the cost of building capacity to serve customers.

The model’s $225 target is not a company forecast. It rests on expectations that Oracle can convert its backlog into revenue, keep its data centers supplied with GPUs, and grow earnings enough to support a higher share valuation.

Oracle said it delivered 850 megawatts of additional data-center capacity in the quarter and more than 300,000 GPUs to AI cloud customers. Future results will show whether those buildouts translate into sustained revenue and stronger cash generation, the key tests behind the optimistic price call.