Oracle Shares Face Divergent Views Ahead of Earnings

Oracle US68389X1054

Wall Street is divided on Oracle's prospects as the software giant prepares to release its second-quarter financial results this Wednesday. The upcoming report is seen as pivotal for the company's direction, with analysts clashing over its valuation following a recent correction, the burdens of AI infrastructure spending, and its growing debt load.

Oracle's share price currently stands at 189.50 euros, marking a decline of approximately 32% from its September 52-week high. This pullback is widely viewed as a necessary market recalibration for the sector, following a period of intense AI-driven enthusiasm that propelled valuations throughout the year. Despite the drop, the core investment thesis held by many remains unchanged: Oracle is leveraging the consistent revenue from its legacy database business to fund its ambitious cloud expansion.

Conflicting Analyst Calls

The start of the week highlighted the stark disagreement among major financial institutions. Barclays significantly reduced its price target from $400 to $330, while maintaining an "Overweight" rating. This adjustment reflects increased caution regarding valuation multiples within a volatile market environment.

In contrast, Mizuho offers a bullish counterpoint. Analyst Siti Panigrahi characterized the recent share price decline as a strategic buying opportunity. The firm reaffirmed its $400 price target and "Outperform" rating, arguing that market fears over soaring capital expenditures (CapEx) for data centers are exaggerated when weighed against Oracle's long-term revenue potential.

Cloud Growth and Debt Under the Microscope

All eyes are now on Wednesday's report (December 10). Consensus estimates project revenue of roughly $16.2 billion, which would represent year-over-year growth of about 15%. A key metric for future performance will be Remaining Performance Obligations (RPO), which are reported to have surged beyond $455 billion. This substantial backlog is largely attributed to the massive cloud infrastructure partnership with OpenAI.

Risks, however, are clearly present. Research firm Monness reiterated its "Hold" rating, pointing to the company's strained balance sheet. With net debt approaching $100 billion and free cash flow pressured by infrastructure investments, Oracle's management is under pressure to demonstrate efficient capital allocation. The transition from a traditional software provider to a backbone of AI infrastructure requires immense upfront investment.

The Path Forward

Wednesday's release will test whether Oracle's strategy is succeeding. For the stock's trajectory, the specific outlook on the profitability of its cloud unit (OCI) and concrete plans for debt reduction are likely to be more critical than the top-line revenue figure alone. Should management convincingly address these points, it could provide the necessary catalyst to reverse the recent downward trend.