Investing.com -- Bank of America (BofA) reinstated coverage of Oracle at Buy with a $200 price objective, citing accelerating demand for AI infrastructure and cloud services, alongside a large backlog of long-term contracts. The price target implies roughly 30% upside from current levels.

Analysts including Tal Liani described Oracle as “a giant going all-in on AI infrastructure and the cloud.” They said the Buy coverage reinstatement reflects “a balanced view of accelerating AI infrastructure demand against the timing, concentration, and capital requirements of Oracle’s transformation.”

A key part of the investment case is Oracle’s $553 billion in remaining performance obligations (RPO), tied to long-duration AI training and cloud infrastructure commitments.

Analysts said this backlog “provides solid visibility for a meaningful growth opportunity,” while noting that execution will be critical as the company scales capacity and converts contracts into revenue.

The bank outlined three core debates shaping the outlook, with the first being the timing of revenue conversion. More than 57% of the RPO is scheduled beyond three years and around 22% beyond five years, increasing reliance on data-center readiness, GPU deliveries, and partner execution.

Customer concentration is another debate, with a significant portion of backlog tied to a small number of AI developers, including OpenAI.

Lastly, BofA highlighted the capital intensity of Oracle’s strategy, as the company ramps investment toward hyperscale levels.

BofA expects Oracle’s capex to reach about $50 billion in fiscal 2026 (FY26) and continue rising through FY29, while free cash flow is projected to remain negative over that period, requiring continued access to external financing.

“However, front-loaded investments are typical during disruptive innovation cycles and we therefore focus on performance beyond the investment cycle,” the analysts noted.

Despite these factors, BofA said expectations have already adjusted following a sharp decline in the stock from its 2025 peak. The bank forecasts revenue growth of 17%, 33%, and 46% over FY26 to FY28 as Oracle Cloud Infrastructure (OCI) capacity expands, alongside roughly 1,200 basis points of gross margin compression.