Key Stats for Oracle Stock
- Pre-market Price Change for Oracle stock: -11.5%
- $ORCL Share Price as of Dec. 10 $223
- 52-Week High: $346
- $ORCL Stock Price Target: $330
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What Happened?
Oracle (ORCL) stock is down over 11% in pre-market after the company reported fiscal second-quarter results that missed revenue expectations.
Oracle posted $16.06 billion in revenue versus the $16.21 billion analysts expected, even though the company exceeded earnings estimates with $2.26 per share.
The bigger concern for investors was Oracle’s cash flow situation. The company burned through $10 billion in free cash flow during the quarter, double what analysts predicted.
Oracle is spending heavily to build AI data centers to meet the massive demand from customers like Meta, Nvidia, and OpenAI.
The company now expects to spend around $50 billion on data centers this fiscal year, up from $35 billion just three months ago.
Cloud infrastructure revenue jumped 68% to $4.1 billion, showing strong demand for Oracle’s AI services.
But software revenue fell 3% to $5.88 billion, missing estimates by nearly $200 million. The company’s remaining performance obligations (contracted future revenue) surged to $523 billion, driven by major new AI deals.
Oracle’s management tried to ease concerns about financing this massive buildout. They said the company will use various strategies beyond traditional borrowing, including having customers bring their own chips and leasing equipment from suppliers.
Still, the negative cash flow and rising debt levels spooked investors.
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What the Market Is Telling Us About Oracle Stock
The market’s reaction shows that investors are worried about Oracle’s path to profitability in AI infrastructure.
While ORCL stock has delivered strong returns this year (up 34%), shares have fallen 32% from their September peak amid growing concerns about capital spending.
The company is clearly winning big AI contracts, given that OpenAI alone committed over $300 billion to Oracle’s infrastructure over five years.
But turning those contracts into profitable revenue while managing massive upfront costs is the challenge.
Oracle’s management remains confident they can maintain their investment-grade debt rating while funding the buildout for “substantially less” than the $100 billion some analysts expected.
For long-term investors, the question is whether Oracle can execute on these huge AI deals profitably. The company operates 147 cloud regions today with 64 more planned.
If they can deliver this capacity efficiently and convert their $523 billion backlog into revenue, ORCL stock could recover quickly. But until investors see more evident progress on cash flow and margins, volatility is likely to continue.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
