Oracle Stock Is Off 59% From Its High. Why This Could Be the Best Time to Buy.
Oracle Corp_ office logo-by Mesut Dogan via iStock Oracle (ORCL) stock has taken a serious beating. Shares are now down more than 59% from their record high, as investors grew uneasy about the company’s enormous AI infrastructure spending. One of the biggest issues weighing on investors is Oracle’s planned increase in capital spending. The company…
Oracle Corp_ office logo-by Mesut Dogan via iStock
Oracle (ORCL) stock has taken a serious beating. Shares are now down more than 59% from their record high, as investors grew uneasy about the company’s enormous AI infrastructure spending.
One of the biggest issues weighing on investors is Oracle’s planned increase in capital spending. The company expects capital expenditures to rise sharply in fiscal 2027 as it expands its capacity to capture strong AI-led demand.
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Oracle also needs to raise a substantial amount of money to help fund the expansion. The company has said it plans to raise $40 billion through a mix of debt and equity. That strategy gives Oracle the capital it needs to support its expansion. However, it also creates two obvious concerns for shareholders: more debt on the balance sheet and the possibility of dilution.
Those issues help explain why investors have been selling the stock so aggressively. Higher spending and financing costs are also likely to weigh on margins at a time when investors are already demanding strong returns from technology companies.
But Oracle isn’t making these investments without a reason. Demand for its cloud infrastructure remains strong. More importantly, the company has a large backlog of contracted business that should gradually translate into solid revenue. Notably, the company is seeing a meaningful conversion of its remaining performance obligations (RPO) into revenue in fiscal 2027.
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Oracle Has Solid Growth Visibility
Oracle expects revenue growth to accelerate sharply, with total revenue projected to increase by about 34% in fiscal 2027. That would be a major step up from the 17% growth recorded in fiscal 2026.
With Oracle turning its growing RPO into revenue and seeing strong demand for its cloud and AI infrastructure, the selloff provides an attractive entry point for long-term investors.
Notably, Oracle’s record $638 billion in RPO provides exceptional visibility into future revenue. Oracle is also changing how it funds its AI expansion. The company recently secured $67 billion of AI infrastructure contracts, with many of those deals involving prepaid arrangements or customers providing their own hardware. That has pushed the value of Oracle’s combined prepaid and customer-supplied AI contracts to $75 billion.
Oracle is also diversifying across its largest customer base. In the last reported quarter, Oracle said four major customers each entered into contracts exceeding $8 billion.
Profit margins, however, could experience some short-term pressure during fiscal 2027. Oracle is continuing to spend aggressively on data centers and cloud infrastructure, which may weigh on gross margins while new facilities are being brought online. However, that pressure should ease as those data centers become fully utilized and generate revenue.
At the same time, Oracle anticipates modest year-over-year reductions in operating expenses. Its focus on driving efficiency and solid revenue growth should help cushion margins.
ORCL’s Earnings Growth Could Accelerate in the Second Half
Oracle’s near-term guidance also suggests management expects the investment cycle to begin translating into stronger financial results.
For the upcoming first quarter, the company expects adjusted earnings per share of approximately $1.72 to $1.76, representing year-over-year growth of roughly 17% to 20%. More importantly, management expects revenue and earnings growth to strengthen during the second half of fiscal 2027 as additional data center capacity comes online.
Beyond the near term, Oracle has maintained its longer-term outlook. The company expects revenue and earnings to compound at annual rates of approximately 31% and 28%, respectively, through the end of the decade.
Oracle’s Risk-Reward Looks Attractive
Oracle has strong demand for its cloud and AI infrastructure, an exceptionally large contracted backlog, and a significant pipeline of prepaid and customer-supported AI infrastructure commitments. As those investments contribute more meaningfully and new capacity comes online, its top- and bottom-line growth is likely to accelerate.
Thus, the steep decline in ORCL shares presents an opportunity to buy.
Analyst sentiment remains constructive, with Oracle carrying a “Strong Buy” consensus rating.
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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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