03:18 PM EDT, 03/11/2025 (MT Newswires) -- Oracle's (ORCL) deal backlog increased 62% year-over-year to $130 billion in fiscal Q3, which indicates future revenue potential but its short-term backlog growth suggests that most of the backlog will not convert to revenue for years, UBS said in a Tuesday note.

The analysts said the company's short-term backlog growth was 17% in the quarter ended Feb. 28, compared with a 15% to 20% range seen in the prior five quarters. Oracle also guided for revenue to grow 20% year-over-year in fiscal 2027, which implies a "big year-2 backlog conversion," according to UBS.

The cloud infrastructure and infrastructure-as-a-service segments are expected to be the key drivers of revenue growth, with software-as-a-service showing a more gradual improvement, the firm said.

UBS said broader macroeconomic weakness in the software and infrastructure markets was also a factor in the company's Q3 revenue missing expectations in addition to capacity constraints, as planned infrastructure expansions did not materialize.

Oracle also faces competitive risks after OpenAI's $12 billion deal with rival CoreWeave raises concerns about its ability to meet high-capacity cloud demand, UBS said.

The firm reduced its price target to $200 from $210 while reiterating a buy rating on the stock.

ORCL shares were down 3.5% in recent trading.

Price: 143.53, Change: -5.26, Percent Change: -3.54