Oracle's Two-Pronged Push: Government Wins and AI Expansion Signal a Growth Path

The tech giant is pushing back against market skepticism with tangible outcomes. After investors grew wary of Oracle's hefty spending plans for 2026, the company now reports concrete results: a fresh government contract coupled with an expanded AI portfolio designed to prove that its ambitious growth strategy can pay off.

The Department of the Air Force awarded Oracle a fixed-price contract worth 88 million dollars yesterday. The agreement runs through December 7, 2028 and deepens Oracle?s role within the Air Force?s Cloud One initiative, a central program aimed at modernizing military IT infrastructure.

The deal covers services around Oracle Cloud Infrastructure (OCI) and access to Oracle AI Database 26ai. Technically, the project is meaningful because the solutions must meet stringent security standards (DISA Impact Levels 5 and 6) and support critical workflows. For Oracle, this award stands for more than just revenue?it reinforces the company?s competitiveness against AWS and Booz Allen Hamilton in the competitive government cloud arena.

Innovation to counter competitive pressure

Alongside government work, Oracle is strengthening its enterprise footprint. The company unveiled 13 new AI agents for its Fusion Cloud Applications. These automated tools target optimization of supply chains and manufacturing processes (SCM).

The new capabilities are designed to streamline complex procurement and logistics workflows without imposing additional costs on existing customers. Market observers view this move as a direct response to SAP and Microsoft, aiming to boost the appeal of Oracle?s SaaS suite through generative AI and protect market share.

Should investors sell immediately? Or is it worth buying Oracle?

Analysts see a buying opportunity

Oracle?s stock has been trading in a volatile band around the $157 mark. The main headwind remains the company?s aggressive 2026 investment plan, with capital expenditure slated to run between $45 billion and $50 billion.

• Order volume: $88 million (US Air Force)
• Term: through December 2028
• Capex plan (2026): $45?$50 billion
• DA Davidson price target: $180 (Rating: Buy)
• Forward P/E: around 19x

The DA Davidson team used the latest valuation to upgrade its view on Oracle, lifting the rating from Neutral to Buy and setting a $180 target. They argue that concerns about high capital costs are overstated. Other firms, such as BMO Capital, have moved targets lower but remain constructive on Oracle overall. They maintain a positive stance, albeit with a more cautious target.

Looking ahead, the primary driver of the stock?s trajectory will be how efficiently Oracle executes its capital-intensive AI strategy. Investors will be closely watching the expansion of data-center capacity and the progress of Oracle?s collaboration with OpenAI in coming quarters.

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