① After the market closed on December 10th (Eastern Time), Oracle... The company will announce its second fiscal quarter results for fiscal year 2026; ② Three months ago, Oracle 's earnings report drove the company's stock price to surge 36% in a single day, but now, with the market's confidence in artificial intelligence... Amid concerns about a bubble and risks in Oracle 's financial structure, can Oracle's new financial report dispel market doubts?
Oracle will release its second fiscal quarter 2026 results after the market closes on Wednesday (December 10) Eastern Time.
Nearly three months ago, Oracle's financial report once drove the company's stock price to surge by 36% in a single day, marking the largest single-day increase since 1999.
However, three months later, amid market concerns about an artificial intelligence bubble and Oracle's debt risks, Oracle's stock price had essentially fallen back to the level before the previous earnings report was released.
Will Oracle's new earnings report and earnings call this Thursday morning Beijing time once again shake the market and reignite confidence in the AI boom? We shall wait and see.
The AI Feast Three Months Ago
In September of this year, Oracle's first fiscal quarter results gave investors a huge surprise: although the quarterly revenue of $14.9 billion and adjusted earnings per share (EPS) of $1.47 were slightly lower than analysts' expectations, the company disclosed a major order that drove its stock price up by 36% overnight, marking the largest single-day increase since 1999.
According to Oracle's financial report released in September, its remaining fulfillment obligations (RPO) surged 359% to $455 billion in the quarter ending August. These backlogged orders reportedly consist of four large contracts from three customers, including a $300 billion cloud infrastructure contract between Oracle and OpenAI for the "Stargate" project.
This enormous figure foreshadows Oracle's considerable revenue conversion potential in the future. Meanwhile, Oracle's forward-looking guidance is equally noteworthy.
Oracle executives at the time projected that cloud infrastructure (OCI) revenue would reach $18 billion in fiscal year 2026, a 77% year-over-year increase, and grow to $144 billion by fiscal year 2030. Oracle CEO Safra Catz described it as a “surprising quarter” and claimed he had observed continued growth in demand for Oracle cloud infrastructure.
The debt elephant in the room
However, investors' celebration didn't last long: Oracle's stock price only remained at its all-time high for about two weeks before experiencing a volatile decline. From the end of September to the present, Oracle's stock price has fallen from its all-time high of $345.22 to $220.54, a cumulative drop of 36% in just over two months.
This indicates that investor confidence has clearly deteriorated over the past two months. On the one hand, investors are concerned about the sustainability of the massive capital expenditures by US AI tech giants; on the other hand, more and more investors are beginning to focus on Oracle's increasingly serious financial structure problems.
Oracle's free cash flow has been negative since the fourth fiscal quarter of 2025 (ending in May of this year). The company is reportedly seeking approximately $38 billion in additional debt financing to fund the development of its artificial intelligence infrastructure, following approximately $105 billion in outstanding debt as of the end of August.
Meanwhile, the company expects its capital expenditures in fiscal year 2026 to reach $35 billion, an increase of 65%, significantly exceeding the company's past investment patterns.
The credit market is sending a more cautious signal. According to data from ICE Data Services on December 2, Oracle's five-year credit default swaps (CDS) have climbed to their highest level since 2009 .
rating agency Moody's Both Oracle and S&P have issued negative outlooks, warning that Oracle's debt growth will exceed EBITDA growth by 2027-2028, with a leverage ratio as high as 4 times.
Both rating agencies have hinted that Oracle's rating could be downgraded to "non-investment grade" if its debt growth continues to outpace its profit growth.
The collaboration with OpenAI highlights the risks of concentration.
What worries investors even more is that Oracle's revenue is overly reliant on the large contract with OpenAI—a five-year, $300 billion contract that will account for nearly a third of Oracle's revenue by 2028.
This means that Oracle's revenue prospects are now highly tied to OpenAI's fate. Analysts question whether OpenAI, despite its rapid expansion, can deliver on its nearly $60 billion annual contract value, raising concerns about its ability to fulfill its promises.
Furthermore, the "Stargate" project, a collaboration between OpenAI and Oracle, involves multiple stakeholders, including Oracle, SoftBank, OpenAI, and MGX, which has led to complexities in contract fulfillment. Additionally, legal experts at Yale University have raised antitrust concerns regarding the collaboration between leaders in the artificial intelligence industry.
The earnings call will be key.
For the earnings report on December 10, Wall Street generally expects adjusted earnings per share of $1.64 (up 11% year-over-year) and revenue of approximately $16.2 billion (up 15% year-over-year).
However, investors will pay more attention to the comments made by company executives during the earnings call than to quarterly metrics.
Given the backlog of orders, debt, and the risks of heavy reliance on OpenAI mentioned above, investors will likely focus on three key issues:
First, can Oracle prove that its large backlog of RPO orders is being converted into recognized revenue?
Second, what specific measures does management intend to take to manage debt levels and capital expenditures while maintaining an investment-grade credit rating?
Third, can Oracle provide concrete evidence that its cloud infrastructure (OCI) growth is accelerating as expected and that it has more revenue outside of its contract with OpenAI?
In fact, the large orders Oracle disclosed in the last fiscal quarter mark a significant strategic shift towards positioning itself as an artificial intelligence infrastructure provider. However, whether this shift will bring sustainable returns, or whether the company has taken on excessive financial leverage, will be the key factors determining its future stock price trajectory.
Oracle is currently at a crossroads of tremendous opportunity and enormous risk. Where Oracle will go in the future may become clearer during this week's earnings call.
(Article source: CLS)
