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Oracle's AI Cloud Surge: From Summer Glory to a Dip Worth Buying
It’s been a wild ride for Oracle investors this year.
Shares of the enterprise software provider kicked off 2025 like most tech stocks, falling victim to the initial tariff-related volatility. From there, Oracle’s stock steadily rose into the early summer on whispers of cloud momentum.
By June, after a solid fiscal fourth-quarter report that showed cloud revenue up 27%, the stock had notched a 30% year-to-date gain, handily outpacing the major indexes. The buzz was electric, with chatter seemingly everywhere surrounding Oracle's OCI (Oracle Cloud Infrastructure) powering enterprise AI pilots.
But late summer? That's when the real fireworks hit. It certainly felt like Oracle was scripting its own blockbuster.
Fast-forward to mid-September: Oracle's Q1 FY26 earnings lit the fuse. Management dropped a bombshell—total remaining performance obligations (RPO) in the fiscal first quarter ballooned to $455 billion (up 359%), with cloud bookings exploding thanks to hyperscaler deals and the ongoing AI frenzy. They even teased an eight-fold ramp in OCI revenue to $144 billion by fiscal year 2030, fueled by partnerships like the rumored OpenAI tie-up for massive GPU clusters.
Is the Recent Dip a Buying Opportunity?
Following the last earnings release, Oracle stock erupted 36% in a single day—its biggest daily pop in decades. As someone who remembers the early days, I couldn't help but smile—here was Oracle, the old guard, stealing the AI spotlight from flashy upstarts.
But markets love a plot twist. By late September, the euphoria cooled faster than a forgotten cup of coffee. Shares peaked at $345 (an all-time high) on September 10th, then nosedived over 40% to current levels, erasing most of the summer gains.
Image Source: StockCharts
What happened? First, the OpenAI "hangover"—early reports of a $300 billion deal fizzled into uncertainty over financing and timelines, spooking investors amid broader tech rotation out of mega-caps. Then came macro jitters: Fed rate cut delays, election noise, and a government shutdown in October that gummed up enterprise spending.
Oracle's own capex guidance raised eyebrows about free cash flow strains, with debt levels climbing to fund the AI buildout.
Why Oracle Suddenly Looks Appealing
When in doubt, zoom out. This dip smells like an opportunity in the Zacks Computer - Software industry, which ranks in the top 22% of 250 Zacks Ranked Industries. Oracle, a component of the industry, is a Zacks Rank #3 (Hold) at the moment. The ranking reflects balanced expectations—earnings revisions are steady, but not surging like in the summer—yet the setup screams undervalued growth.
Heading into Wednesday's fiscal second-quarter report, the Zacks Consensus EPS estimate stands at $1.63 (up 11% year-over-year) on $16.15 billion in revenues (up 14.8%). Estimates have remained steady over the past 60 days.
Image Source: Zacks Investment Research
Strategically, Oracle remains uniquely positioned within the enterprise AI infrastructure space. Its second-generation cloud (OCI Gen2) offers multicloud interoperability and sovereign cloud capabilities that have resonated with large organizations hesitant to become fully dependent on any single hyperscaler.
Partnerships with Nvidia, AMD, and Ampere, combined with live supercluster deployments, provide tangible evidence that demand is translating into revenue. From a valuation perspective, the recent correction has brought the forward P/E down to approximately 30 times—still a premium to the broader software sector but considerably more reasonable than the 40+ times seen at the September peak.
Bottom Line
As we head into the holiday season, treat this pullback like Black Friday: Stock up on quality at a discount.
Investors awaiting Wednesday’s print may find particular value in monitoring cloud RPO growth, infrastructure margins, and any updated commentary on large AI contracts. A beat-and-raise scenario—consistent with Oracle’s recent track record—could serve as a catalyst to rekindle institutional interest.
Disclosure: Oracle (ORCL - Free Report) is a long-term holding in the Zacks Income Investor portfolio. The author may also hold an interest in the stock.
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Oracle's AI Cloud Surge: From Summer Glory to a Dip Worth Buying
It’s been a wild ride for Oracle investors this year.
Shares of the enterprise software provider kicked off 2025 like most tech stocks, falling victim to the initial tariff-related volatility. From there, Oracle’s stock steadily rose into the early summer on whispers of cloud momentum.
By June, after a solid fiscal fourth-quarter report that showed cloud revenue up 27%, the stock had notched a 30% year-to-date gain, handily outpacing the major indexes. The buzz was electric, with chatter seemingly everywhere surrounding Oracle's OCI (Oracle Cloud Infrastructure) powering enterprise AI pilots.
But late summer? That's when the real fireworks hit. It certainly felt like Oracle was scripting its own blockbuster.
Fast-forward to mid-September: Oracle's Q1 FY26 earnings lit the fuse. Management dropped a bombshell—total remaining performance obligations (RPO) in the fiscal first quarter ballooned to $455 billion (up 359%), with cloud bookings exploding thanks to hyperscaler deals and the ongoing AI frenzy. They even teased an eight-fold ramp in OCI revenue to $144 billion by fiscal year 2030, fueled by partnerships like the rumored OpenAI tie-up for massive GPU clusters.
Is the Recent Dip a Buying Opportunity?
Following the last earnings release, Oracle stock erupted 36% in a single day—its biggest daily pop in decades. As someone who remembers the early days, I couldn't help but smile—here was Oracle, the old guard, stealing the AI spotlight from flashy upstarts.
But markets love a plot twist. By late September, the euphoria cooled faster than a forgotten cup of coffee. Shares peaked at $345 (an all-time high) on September 10th, then nosedived over 40% to current levels, erasing most of the summer gains.
Image Source: StockCharts
What happened? First, the OpenAI "hangover"—early reports of a $300 billion deal fizzled into uncertainty over financing and timelines, spooking investors amid broader tech rotation out of mega-caps. Then came macro jitters: Fed rate cut delays, election noise, and a government shutdown in October that gummed up enterprise spending.
Oracle's own capex guidance raised eyebrows about free cash flow strains, with debt levels climbing to fund the AI buildout.
Why Oracle Suddenly Looks Appealing
When in doubt, zoom out. This dip smells like an opportunity in the Zacks Computer - Software industry, which ranks in the top 22% of 250 Zacks Ranked Industries. Oracle, a component of the industry, is a Zacks Rank #3 (Hold) at the moment. The ranking reflects balanced expectations—earnings revisions are steady, but not surging like in the summer—yet the setup screams undervalued growth.
Heading into Wednesday's fiscal second-quarter report, the Zacks Consensus EPS estimate stands at $1.63 (up 11% year-over-year) on $16.15 billion in revenues (up 14.8%). Estimates have remained steady over the past 60 days.
Image Source: Zacks Investment Research
Strategically, Oracle remains uniquely positioned within the enterprise AI infrastructure space. Its second-generation cloud (OCI Gen2) offers multicloud interoperability and sovereign cloud capabilities that have resonated with large organizations hesitant to become fully dependent on any single hyperscaler.
Partnerships with Nvidia, AMD, and Ampere, combined with live supercluster deployments, provide tangible evidence that demand is translating into revenue. From a valuation perspective, the recent correction has brought the forward P/E down to approximately 30 times—still a premium to the broader software sector but considerably more reasonable than the 40+ times seen at the September peak.
Bottom Line
As we head into the holiday season, treat this pullback like Black Friday: Stock up on quality at a discount.
Investors awaiting Wednesday’s print may find particular value in monitoring cloud RPO growth, infrastructure margins, and any updated commentary on large AI contracts. A beat-and-raise scenario—consistent with Oracle’s recent track record—could serve as a catalyst to rekindle institutional interest.
Disclosure: Oracle (ORCL - Free Report) is a long-term holding in the Zacks Income Investor portfolio. The author may also hold an interest in the stock.