Oracle (ORCL) Stock: Can Wednesday’s Earnings Reverse the 36% Drop?

TLDR

• Oracle posts fiscal Q2 2026 results December 10, Wall Street forecasts $1.64 EPS on $16.19 billion revenue
• Shares dropped 7.4% over past month despite 33% year-to-date climb on debt worries
• Company’s debt ballooned to $111.6 billion from $84.5 billion year-over-year to fund AI expansion
• $18 billion September bond offering ranks among tech’s largest debt issuances ever
• $300 billion OpenAI partnership and 359% surge in contracted revenue backlog fuel mixed sentiment

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Oracle delivers fiscal second-quarter earnings after Wednesday’s market close. Analysts project adjusted earnings of $1.64 per share and revenue of $16.19 billion, showing 11.6% and 15% year-over-year growth.

Oracle Corporation, ORCL

The stock endured a turbulent October, plunging 23% in its worst monthly performance since 2001. Concerns about debt obligations tied to AI infrastructure spending drove the selloff.

Oracle’s September bond sale raised $18 billion in one of tech’s largest debt offerings. The company now stands as the top investment grade debt issuer among non-financial firms, per Citi. Total debt reached $111.6 billion as of August, up from $84.5 billion a year prior.

Cash and equivalents slipped to $10.45 billion from $10.6 billion during the same timeframe. Citi analyst Tyler Radke estimates Oracle will raise $20 billion to $30 billion in debt annually over the next three years to fund data center construction.

OpenAI Deal Reshapes Oracle’s Position

A $300 billion agreement with OpenAI surfaced in September. The deal involves computing power purchases spanning roughly five years beginning in 2027. This partnership elevated Oracle’s standing in the AI infrastructure race.

TD Cowen analyst Derrick Wood rates the stock a Buy with a $400 target. He notes shares trade at 22x calendar year 2027 earnings, which he views as trough valuations. Wood believes confirmation of Oracle Cloud Infrastructure growth through fiscal 2026 could ease capacity concerns.

RBC Capital analyst Rishi Jaluria maintains a Hold rating with a $310 price target. He suggests Oracle might explore off-balance sheet facilities, equity raises, or sovereign wealth fund investments. The analyst references Meta’s $27 billion Blue Owl Capital joint venture as a potential financing template.

Credit default swaps for Oracle’s 5-year debt hit multi-year highs. Barclays and Morgan Stanley analysts recommend clients purchase these instruments as protection. Morgan Stanley noted the swaps attracted inexperienced “tourists” alongside typical credit investors.

Revenue Backlog Offers Counterbalance

Remaining performance obligations could exceed $500 billion, representing a more than fivefold increase year-over-year. These contracted revenues await recognition on financial statements. Oracle’s September disclosure of 359% RPO growth to $455 billion sparked a 36% single-day stock surge, the best since 1992.

Shares have since erased those gains entirely. D.A. Davidson analyst Gil Luria plans to monitor Oracle’s core database business closely. This higher-margin segment determines the company’s flexibility for additional capital raises.

Daniel Sorid, Citi’s head of U.S. investment grade credit strategy, expressed unease about the capital-intensive transformation. He highlighted the enormous funding requirements during an investor video call.

Oracle secured construction loans from a banking consortium for data centers in New Mexico and Wisconsin. New CEOs Clay Magouyrk and Mike Sicilia face pressure demonstrating AI demand justifies aggressive buildout plans.

Investors await confirmation that AI demand supports Oracle’s spending strategy. Wednesday’s fiscal second-quarter results will either validate the infrastructure investment thesis or deepen financial concerns about the company’s leveraged position heading into 2026.

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