Oracle shares fell roughly 2% on Tuesday. The pullback came as investors digested broader concerns about AI infrastructure spending. Those concerns were triggered by Alphabet’s announcement of plans to raise $80 billion through an equity offering. The news prompted questions about how much capital the technology sector may ultimately need to sustain its AI expansion. As a result, some profit-taking emerged after Oracle’s strong rally over the prior three months.
What Scotiabank is watching ahead of earnings
Those spending questions carry particular relevance for Oracle. Scotiabank analyst Patrick Colville flags capital expenditure plans as one of the key issues to watch when Oracle reports fiscal fourth-quarter results on Wednesday. He describes himself as cautious heading into the report. Nevertheless, his overall view of Oracle remains constructive, especially when looking beyond the near term.
A capex forecast well above consensus
Colville’s most notable projection concerns Oracle’s fiscal 2027 spending. He estimates the company could spend close to $100 billion during that period. Current Wall Street consensus sits at roughly $71 billion. That is a meaningful gap. According to Colville, a primary driver behind his higher estimate is hardware inflation, which he calculates could run near 15%. That inflationary pressure creates additional costs as Oracle continues expanding its cloud infrastructure footprint.
Importantly, Colville’s elevated capex estimate does not reflect deteriorating demand or weaker economics. Instead, he argues that Oracle may simply need to invest considerably more than current forecasts assume in order to support the cloud growth targets that analysts already project. His analysis suggests the spending required to deliver expected cloud infrastructure revenue growth is materially higher than what consensus models currently imply.
Offsetting factors and workforce savings
Colville also identifies opportunities for Oracle to offset some of the pressure from rising hardware costs. He updated his model to incorporate approximately $800 million in annualized operating expense savings tied to the company’s recent workforce reductions. After accounting for both the margin headwinds from inflation and those savings, he modestly raised his fiscal 2027 earnings estimate relative to his previous forecast.
He also noted that visibility into the precise structure of customer agreements remains limited. That makes it difficult to determine exactly how future costs and pricing will be allocated. Despite that uncertainty, Colville expressed confidence in his existing forecast, citing management commentary that development projects remain on schedule or ahead of expectations.
Volatile weeks ahead, but long-term upside intact
Looking ahead, Colville expects Oracle shares may experience some volatility over the coming weeks as the market processes earnings results, spending plans, and management guidance. However, he believes the risk and reward balance skews to the upside for investors willing to maintain a longer time horizon.
More broadly, he continues to favor Oracle’s positioning within the AI-driven cloud market. He points to the company’s GPU-as-a-service capabilities, its customer-neutral approach, and its access to funding as key structural advantages supporting future expansion.
Colville rates Oracle shares Outperform, the equivalent of a Buy. His price target of $29 implies approximately 18% upside from current levels. Wall Street broadly agrees. Oracle carries a Strong Buy consensus rating based on 33 analyst reviews, with 28 Buy ratings and 5 Holds. The average price target across those analysts stands at $254.33, implying roughly 4% upside. That modest figure likely reflects the substantial gains the stock has already recorded in recent months rather than any lack of confidence in Oracle’s long-term trajectory.
Source: TipRanks / Scotiabank
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