Oracle’s Strategic Pivot: TikTok Partnership and AI Ambitions Face Market Scrutiny

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Oracle Corporation is concluding the year with a significant strategic maneuver, confirmed by its pivotal role in TikTok's new U.S. joint venture. This development arrives as the company's share price, despite robust quarterly earnings, remains substantially below its all-time peak. Investor focus is now split between the promise of the TikTok alliance, a massive AI infrastructure build-out, and mounting concerns over the company's escalating debt.

The announcement regarding TikTok landed as the market was still digesting Oracle's results for its second fiscal quarter of 2026, reported on December 10. While the operational performance showed clear strength, the financial narrative was complicated by heavy investments and a growing debt load, which dampened investor sentiment.

Fiscal Q2 2026 Key Metrics

• Total Revenue: $16.1 billion, a 14% year-over-year increase.
• Cloud Revenue: $8.0 billion, surging 34%.
• Infrastructure-as-a-Service (IaaS) Revenue: $4.1 billion, up 68%.
• Non-GAAP Earnings Per Share (EPS): $2.26, representing 54% growth.

A standout figure was the Remaining Performance Obligations (RPO), which soared to $523 billion—a staggering 438% annual increase. This backlog is fueled by multi-year cloud and AI infrastructure contracts with major clients, including Meta, NVIDIA, and OpenAI.

Nevertheless, the market response was negative. A forecast that slightly missed expectations, combined with the high capital expenditure requirements, sparked skepticism. Shares fell approximately 11% the day after the earnings release and continue to trade more than 40% below their September 2025 record high of $345.72.

The TikTok Joint Venture: A Trust and Security Play

Oracle has been officially confirmed as one of three "Managing Investors" in the newly formed TikTok USDS Joint Venture LLC. Alongside Silver Lake and Abu Dhabi-based MGX, Oracle holds a 15% stake each, giving the trio a combined 45% ownership in the U.S. entity.

The agreement, signed on December 18 and announced on December 19, propelled Oracle's stock nearly 6% higher in pre-market trading the following day. Under the deal, Oracle assumes a critical security function, acting as the "Trusted Security Partner." Its responsibilities will include auditing and validating compliance with national security requirements, hosting sensitive U.S. user data within its domestic data centers, and overseeing the security of TikTok's algorithms.

The joint venture, valued at approximately $14 billion according to September statements from U.S. Vice President JD Vance, features the following ownership structure:
* 50% to new investors (Oracle, Silver Lake, MGX at 15% each, plus 5% to other investors).
* 30.1% to existing ByteDance investors (via affiliated entities).
* 19.9% retained by ByteDance.

The transaction is scheduled to close on January 22, 2026.

Debt-Fueled AI Expansion Raises Eyebrows

Oracle's aggressive push to expand its AI infrastructure has become a central debate among investors. The company's total debt has increased by 40% over the past year, reaching $124 billion. Furthermore, cash outflow for the first half of fiscal 2026 widened from $2.7 billion to $10 billion.

The market is pricing in higher risk associated with these debt-financed investments. A notable warning signal is the significant widening of spreads on Oracle's Credit Default Swaps (CDS), which have reached levels last seen in 2009. This trend reflects broader market apprehension about the high-stakes, capital-intensive AI investments being undertaken by several major technology firms.

OpenAI: A Key Client with Questions

The partnership with OpenAI, the developer of ChatGPT, is a primary driver behind the enormous RPO figure, with commitments believed to exceed $300 billion. However, this reliance also introduces uncertainty. Analysts are questioning whether OpenAI can achieve its ambitious revenue targets in an increasingly competitive landscape, particularly against rivals like Google. This doubt over the long-term profitability of such contracts feeds directly into the current assessment of Oracle's risk-reward profile.

Divergent Views from Wall Street

Analyst sentiment following the Q2 report is mixed. At least 13 brokerages have lowered their price targets, though several maintain a bullish outlook:
* Wedbush analyst Dan Ives sees potential for the stock to reach $250 in 2026 if the data center expansion is executed successfully.
* Mizuho reaffirmed an "Outperform" rating with a $400 price target.
* RBC Capital Markets reduced its target from $310 to $250 but maintains a "Sector Perform" rating.

The consensus among the 41 analysts covering the stock is a "Moderate Buy," with an average price target near $306.

Upcoming Catalysts and Financial Guidance

Looking ahead, Oracle has provided guidance for its third fiscal quarter of 2026, anticipating constant-currency cloud revenue growth of 37% to 41%. Total revenue is expected to increase between 16% and 18%, with adjusted EPS projected to rise 12% to 14%.

Key near-term dates for investors include:
* January 9, 2026: Ex-dividend date for the quarterly dividend of $0.50 per share.
* January 22, 2026: Expected closing date for the TikTok U.S. joint venture.
* January 23, 2026: Dividend payment date.
* March 2026 (anticipated): Release of Q3 FY2026 financial results.

Oracle's stock performance in early 2026 will largely depend on its ability to advance its AI infrastructure build-out as planned, convert its substantial backlog into realized revenue, and successfully close the TikTok venture. Founder Larry Ellison continues to emphasize the company's strategy of "chip neutrality" and a focus on building high-performance, cost-efficient cloud data centers to meet soaring AI demand.