Morgan Stanley Raises Oracle Target by $3, Keeps Equal Weight as GPU Margins Improve

Morgan Stanley sees a better margin path in Oracle’s GPU cloud business, but its latest stock call remains deliberately modest. Analyst Sanjit Singh raised Oracle’s price target by $3, to $210, on September 4 and retained an Equal Weight rating while highlighting an improving gross-margin trajectory for GPU-as-a-Service.

A margin signal, not a changed call

GPU-as-a-Service means renting access to graphics processors for AI workloads through the cloud. Morgan Stanley’s assessment suggests its view of the economics is improving as Oracle builds that business. Yet the firm paired that observation with only a $3 target increase and no rating change, making the update a narrow revision rather than a broader endorsement of Oracle’s AI expansion.

Fast cloud growth supplies the backdrop

Oracle’s latest reported quarter helps explain why GPU-service margins have become a focal point. Fiscal fourth-quarter total cloud revenue rose 47% from a year earlier to $9.9 billion, while Oracle Cloud Infrastructure revenue rose 93% to $5.8 billion. Total revenue was $19.2 billion, up 21%.

Oracle’s remaining performance obligations, or contracted revenue not yet recognized, ended the quarter at $638 billion. The company said $75 billion of the prepaid and customer-supplied hardware portions of its large AI contracts involved GPUs. Oracle says those arrangements reduce the capital it must raise for AI data centers.

The financing test remains ahead

The stronger margin outlook sits beside a capital-heavy buildout. Oracle’s capital expenditures rose from $21 billion in fiscal 2025 to $55.7 billion in fiscal 2026, when it generated $32 billion in operating cash flow but reported negative free cash flow of $23.7 billion. It raised $43 billion in debt and $5 billion in equity during that year.

For fiscal 2027, Oracle expects capital expenditures of up to $95 billion, with customer repayments expected to cover up to $25 billion. It also expects to raise about $40 billion through debt and equity. Those are company expectations, so the next test is whether improved GPU-service economics can develop alongside the planned spending and funding program.