There is significant market debate regarding Oracle's (ORCL.US) remaining performance obligations (RPO) and their primary linkage to OpenAI. However, Wells Fargo believes these concerns are overblown and views the OpenAI partnership as a long-term positive for Oracle.
Analyst Michael Turrin stated in a research note to clients: "While we don't currently see risks to revenue/EPS contribution from OpenAI at this stage, we've modeled OpenAI and non-OpenAI segments separately to assess the impact."
"(Our estimates) cross-verified with company guidance and RPO disclosures project revenues reaching $10B, $39B, $65B, and $78B in FY2027 through FY2030 respectively. Applying Oracle's disclosed 35% average gross margin and our estimated 20% net margin, while assuming share count remains unchanged, we expect OpenAI to contribute approximately 25-30% of Oracle's EPS from FY2028 to FY2030."
Turrin, who maintains an "Overweight" rating with a $280 price target on Oracle, called the recent sharp decline in Oracle's stock "an overreaction." He added that given AI is still in its "very early innings," Oracle has potential to "gain meaningful market share" in cloud infrastructure-as-a-service.
Oracle released its Q2 earnings on December 10, 2025, followed by a significant stock drop. The database software giant reported revenue missing analyst expectations while capital expenditures exceeded forecasts. Subsequent reports about potential delays in data center construction for OpenAI became the final straw, despite Oracle's spokesperson denying the claims, stating "all sites meeting contractual commitments remain on schedule with all milestones proceeding as planned."
The AI sector has faced a harsh "reality check."
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