As Oracle prepares to release its quarterly results, its stock has returned to the spotlight following a significant pullback. Market experts are now debating whether the recent sell-off presents a compelling opportunity, with many arguing that investor concerns have been overblown. The central pillar of the bullish thesis rests on the company’s colossal backlog of orders in the artificial intelligence sector.
Surging AI Demand Offsets Capex Concerns
The primary driver of analyst optimism is Oracle’s exploding contractual backlog. Market researchers point to the metric known as Remaining Performance Obligations (RPO), which saw a staggering 359 percent year-over-year increase to $455 billion in the first fiscal quarter. This figure is seen as a direct indicator of future revenue, fueled by overwhelming demand for AI infrastructure.
This demand context is crucial for understanding the company’s substantial capital expenditure plans. While some critics highlight Oracle’s intention to double its investments in fiscal 2025 to expand cloud capacity, proponents counter that these outlays are low-risk. They are directly tied to pre-signed customer contracts, unlike speculative infrastructure builds. Analysts from firms like Bernstein and Barclays maintain a positive outlook, suggesting the market should refocus on these fundamental strengths.
Wall Street Sees Value After the Decline
The stock has attracted favorable commentary from several research desks at the start of the week. Mizuho Securities reaffirmed its “Outperform” rating alongside a $400 price target, characterizing the recent share price weakness as an attractive entry point. Oracle’s shares are currently trading at €189.74, approximately 32% below their 52-week high.
Should investors sell immediately? Or is it worth buying Oracle?
The rationale from these experts is clear: they view the market’s anxiety over rising capital investment (CapEx) as misplaced. Mizuho analysts contend that demand for AI computing capacity continues to vastly outstrip supply. They note that new graphics processing units (GPUs) become revenue-generating assets almost immediately upon deployment.
High Valuation Meets a Critical Earnings Report
Despite the retreat below the €200 level, Oracle’s equity is not historically cheap. The market is pricing in aggressive growth for its Oracle Cloud Infrastructure (OCI) unit—which competes directly with Amazon AWS and Microsoft Azure—with a forward P/E ratio hovering near 50. Strategic partnerships with industry leaders like Nvidia and OpenAI underpin this growth narrative.
All attention now turns to Wednesday evening’s post-market earnings release. Investors will be scrutinizing two key metrics: any acceleration in cloud revenue growth and an updated outlook on investment plans. Should management reaffirm its growth trajectory, it could establish a foundation for a sustained technical recovery, validating the stance of analysts who see the current price as a buying chance.
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