Oracle surprised the market with its cash flow forecast. Its shares soared 12%.

Oracle shares soared more than 12% during trading in New York after the company exceeded analysts' forecasts for free cash flow. This eased investors' concerns about the return on the company's artificial intelligence investments, according to Bloomberg.

According to Oracle’s forecast, free cash flow will total $30 billion in the fiscal year ending in May 2029, the company’s CFO, Hilary Maxon, said at the annual conference in Las Vegas. Analysts had expected the figure to remain negative that year, the agency notes.

The company also expects revenue to reach $225 billion by fiscal year 2030, which implies an average annual growth rate of 35%. According to an LSEG survey, analysts expect revenue to grow by 8% in fiscal year 2027, with growth and a significant acceleration in growth rates expected over the next two years, CNBC reports.

Oracle is transforming from a database developer into a provider of computing power for AI tasks and is undertaking a large-scale data center construction project for OpenAI and other clients. Wall Street is closely monitoring the amount spent on these projects and how quickly the company can complete them, Bloomberg notes.

Investors' concerns about Oracle's cash flow intensified following the release of its first-quarter results for fiscal year 2027 in September: at that time, the company's negative free cash flow reached $5.4 billion, and its debt rose to $125 billion.

The company’s capital expenditures for that quarter jumped to $28.5 billion, compared with $8.5 billion a year earlier, and Oracle reaffirmed its capital expenditure forecast of $70 billion for the entire 2027 fiscal year. Meanwhile, the company’s remaining contract obligations (RPO) at the end of that quarter totaled $664 billion, a significant portion of which comes from a $300 billion deal with OpenAI to build data centers.

Morningstar analyst Luke Young warned at the time that it would take years before Oracle’s cloud business revenue reached a scale that would allow it to simultaneously expand capacity and generate positive cash flow. At the same time, Evercore analysts noted that cash outflow turned out to be less than the market had feared, and that the debt burden—which is causing justified concern among investors—is overshadowing the positive aspects of the company’s business.

From the start of the year through the close of trading on October 27, Oracle’s stock has fallen 33%. Nevertheless, no Wall Street analyst is currently recommending that investors sell the stock, and more than 80% recommend buying it, according to MarketWatch data. The average target price of $244.75 is nearly 90% higher than the current market price. The most optimistic forecast on Wall Street predicts that Oracle’s stock will rise by more than 200%, to $4,000, over the next 12 months.

This article was AI-translated and verified by a human editor