A prominent research firm, Evercore ISI, has positioned Oracle as a leading selection for 2026 within the enterprise software arena, placing it alongside giants like Microsoft and Snowflake. This bullish outlook hinges on the sustained demand for cloud infrastructure and artificial intelligence computing power. However, the company’s stock performance and balance sheet reveal a complex narrative where a high-stakes growth strategy comes with significant financial costs, leaving the market to grapple with its true valuation.
The Debt-Fueled Engine of Growth
Oracle’s ambitious push to construct next-generation AI data centers, part of its reported “Stargate” class infrastructure, requires immense capital. Recent reports indicate the company’s total debt load now exceeds $111 billion. This aggressive investment was starkly visible in its most recent quarterly results (Q2), where capital expenditures dramatically outpaced operational cash generation, resulting in a negative free cash flow of approximately $10 billion.
This financial reality forms a critical counterpoint to the optimism from Evercore ISI’s 2026 outlook. The analysts anticipate a continued acceleration in AI spending and robust infrastructure demand, with Oracle poised to be a clear beneficiary. Yet, the substantial debt incurred to build this capacity is a fundamental concern that investors cannot ignore.
The equity market is actively pricing in this tension. After reaching a 52-week high of €280.70 in September, Oracle’s shares have since retreated, trading approximately 41% below that peak. In a recent session, the stock closed at €165.68, marking a notable recovery from its April low but still reflecting the dichotomy between long-term promise and near-term financial pressure.
TikTok Partnership and Infrastructure Milestones
Recent developments surrounding the social media platform TikTok have added another layer to Oracle’s story. An agreement was reached to transition TikTok’s U.S. operations into a joint venture led by Oracle and Silver Lake. Initially, this news fueled positive sentiment around Oracle’s platform and data management capabilities.
However, by Tuesday, a more cautious tone emerged as investor focus shifted back to the overarching financial sustainability of the AI infrastructure build-out. The core challenge remains the capital-intensive nature of this expansion: while targeting a massive market opportunity, the upfront spending weighs heavily on cash flow and leverage in the short term.
Should investors sell immediately? Or is it worth buying Oracle?
A key piece of the infrastructure puzzle was secured recently. On December 18, the Michigan Public Service Commission (MPSC) approved the power contracts for a planned AI data center. For proponents of the stock, this is a crucial step, providing the physical foundation to serve major clients like OpenAI, even if the associated revenue will materialize in financial statements with a lag.
The scale of future demand is underscored by Oracle’s latest reported remaining performance obligation (RPO) of $523 billion. This figure simultaneously highlights strong customer interest and the immense pre-financing required to meet it. Consequently, high capital intensity is expected to be the primary drag on margins and free cash flow for the foreseeable future.
Valuation, Technicals, and the Path to 2026
The market’s conflicting views are also evident in valuation metrics. The average analyst price target sits near $309, suggesting a theoretical upside potential of over 50% from current levels. This significant gap reflects the expectation that today’s heavy investments will convert into substantially higher future cash flows and profits.
From a technical perspective, the stock is consolidating. It has recovered 9% over the past week, though its year-to-date performance shows only modest gains. Notably, the share price remains roughly 12% below both its 50-day and 200-day moving averages, emphasizing the corrective nature of the recent price action. A Relative Strength Index (RSI) reading near 70 further indicates the short-term upward move may be becoming extended.
The first quarter of 2026 is shaping up to be a critical period. Oracle must convincingly demonstrate that its free cash flow is on a path to recovery despite ongoing high capital expenditures. If management can outline a clear trajectory for improving cash generation and managing debt, the “Top Pick for 2026” thesis will gain substantial support. Failure to provide this evidence, however, will likely continue to constrain the stock’s valuation premium as the market prices in the risks of its capital-intensive offensive.
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