Morgan Stanley trimmed its 12-month price target on Oracle to $207 per share from $213 and retained an Equal Weight rating, noting stronger operational execution and widening demand but saying important questions remain around the cost, financing and profitability of Oracle's fast-growing GPU-as-a-service business.
In a research note, analyst Keith Weiss said the firm is "feeling better on execution and demand" after Oracle's latest quarterly report, while also warning that "uncertainty persists around GPUaaS cost, financing, and margin profile of ramping GPUaaS business." Morgan Stanley also signaled a cautious stance on credit and related trades tied to Oracle.
The note outlines four specific areas where the firm has revised its view more favorably. First, what Morgan Stanley characterizes as strong GPUaaS capacity delivery in the third quarter prompted a material upward adjustment to the firm's fiscal year 2030 GPUaaS earnings-power estimate in its base case - from $1.51 to $2.90.
Second, the cloud database business showed improving momentum, leading Morgan Stanley to lift its revenue forecasts for fiscal years 2027 and 2028 by 3% and 15%, respectively. Those revisions imply a 41% compound annual growth rate for cloud database revenue from fiscal 2026 to fiscal 2028 according to the firm's modeling.
Third, Morgan Stanley says customer concentration risk has eased somewhat given robust AI compute demand and recent customer funding catalysts. Fourth, the firm's estimate of Oracle's core earnings power excluding GPUaaS was increased from $8.51 to $9.07.
Despite these upgrades, Morgan Stanley emphasized three central debates that remain unresolved. The first is the total cost and execution risk associated with the planned buildout of more than 10 gigawatts of GPU capacity - including exposure to potential shell delivery timelines. Oracle has stated an expectation to bring roughly 10 gigawatts of capacity online over the next three years, a target that Morgan Stanley previously described as presenting "big opportunity, little room for error."
The second open question is how Oracle will fund the GPUaaS expansion. The third is the margin profile of "bring your own hardware" arrangements and how those deals will affect long-term mix and aggregate margins.
Morgan Stanley also flagged that non-GAAP gross margins in the third quarter fell short of expectations and continued to decline, leaving the margin trajectory as a key outstanding uncertainty as GPUaaS scales.
Overall, the firm upgraded several forward-looking metrics to reflect stronger capacity delivery and database demand, while retaining caution on credit and highlighting substantial execution and financing risks tied to the multi-year GPUaaS roll-out.