Investing.com -- BMO Capital Markets upgraded Oracle (NYSE: ORCL) to Outperform from Market Perform and raised its price target to $235, pointing to stronger software growth and higher operating income through fiscal 2027, even as capital spending rises.

Oracle reported better-than-expected quarterly results and issued guidance above consensus, including revenue of more than $67 billion for fiscal 2026 and cloud revenue growth of over 40%.

The company maintained its goal of growing revenue by at least 20% in fiscal 2027.

BMO highlighted that Oracle’s remaining performance obligations rose 41% year-on-year to $138 billion, above consensus, and that the company expects RPO to double in fiscal 2026.

While BMO said the RPO target appears ambitious, it noted that even partial delivery could support further gains in the stock.

The firm also pointed to a pickup in Oracle’s cloud database and software-as-a-service growth. Database services revenue rose 31% and SaaS revenue increased 11% in the quarter, both improving from the prior period.

BMO said this trend could help offset margin pressure from infrastructure investment.

Oracle’s capital expenditure reached $9 billion in the quarter and is expected to rise to at least $25 billion in fiscal 2026, up from $21.2 billion in fiscal 2025.

BMO projects the company will post negative free cash flow this year and modestly positive free cash flow next year.

Operating margin is expected to decline to 41.4% in fiscal 2026 and to 39.7% in 2027, from 43.6% in fiscal 2025, mainly due to depreciation.

Still, BMO expects operating income to grow by 11% in 2026 and 14% in 2027. The firm values Oracle at 30 times projected fiscal 2027 earnings.