Oracle shares rocketed as much as 43% in a single day, just as news broke that the cloud service provider inked a massive deal with OpenAI.
The Wall Street Journal reports that Oracle and OpenAI signed a five-year, $300 billion compute contract starting in 2027 in one of the largest cloud deals ever.
The contract would require 4.5 gigawatts of capacity, roughly equal to two Hoover Dams, underscoring the capital intensity of frontier AI. On the same day, ORCL shares jumped from $241 to as high as $345, an over 43% surge before closing at $328
The new deal between Oracle and OpenAI is part of a “Bookings Bonanza,” according to Citi’s co-head of US software equity research, Tyler Radke. In a CNBC interview, Radke abruptly upgrades ORCL’s rating and says the bank is now targeting $410 for the stock, citing massive growth in the firm’s forecast of future revenue from existing contracts.
“Obviously, this was a monster quarter from a bookings perspective. We were well above the street, but certainly weren’t expecting $300 billion of new RPO (remaining performance obligation) added to the business.
But I think taking a step back, I mean, what’s crazy about this move, our numbers for revenue and EPS for FY28, which is two years out, they went up by 25 to 30%. And so you look at this move in the shares up today, almost 40%, on a valuation basis, it’s actually not that much more expensive than it was earlier this week.
And certainly pre -market, when we upgraded it, the shares were up only about 25%. So our view is, you’re gonna see revenue growth for Oracle at a consolidated level, approach 50% in a few years out, which is really unheard of at this scale. We think there’s going to be a lot more exciting news to come, whether that’s additional contracts they talked about, more bookings coming in the next few months, closing in on half a trillion of RPO.”
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