The artificial intelligence wave has positioned Oracle as the key AI infrastructure development player. This apparent position overshadowed the company’s poor earnings report for Q1 2026, which was released on September 9.
The stock soared over 30% following the earnings due to the remaining performance obligation (RPO) increasing 359% to $455 billion.
Here are the earnings highlights:
- Revenue $14.9 billion, up 12% in USD and up 11% in constant currency.
- Net income was $2.927 billion, slightly lower compared to $2.929 billion in Q1 2025.
- Earnings per share down(EPS) 2% to $1.01 year-over-year.
- EPS was $0.01 lower than the consensus estimates.
- Free cash flow decreased 152% YoY to negative $5.9 billion.
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Expert opinions following the earnings
Following the earnings report, Bank of America analysts Brad Sills and Matt Bullock changed Oracle’s rating from neutral to buy and raised their price target for (ORCL) stock from $295 to $368. They said their bullish view of Oracle is based on accelerating demand in the company’s Oracle cloud infrastructure segment.
Analysts noted risks to their price objective:
- Severe downturn in enterprise software spending
- Currency headwinds
- Issues with the integration of past acquisitions
- Database competition from IBM, Amazon, and Microsoft
- Apps competition from SAP, Microsoft, and others
- The development of viable open source database and middleware alternatives
Veteran analyst Stephen Guilfoyle expressed a different opinion, noticing that with RPO at $455 billion, deferred revenue for the coming twelve months (current) is only $12.098 billion, and that there was no entry in the report for non-current deferred revenue.
Guilfoyle wrote for TheStreet Pro:
It turned out that most of that RPO is a $300 billion deal with OpenAI. Following that revelation, Moody’s expressed concerns.
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“Moody’s raised a major red flag on Oracle’s much-touted $300 billion AI infrastructure deal with OpenAI. Though the contract marks the largest in Oracle’s history, analysts at the firm believe that the concentration puts outsized financial pressure on the company if OpenAI stumbles,” writes Moz Farooque for TheStreet.
Oracle appoints two CEOs, sells bonds for $18 billion
On September 22, Oracle promoted Clay Magouyrk and Mike Sicilia to CEOs. Former CEO Safra Catz has been appointed executive vice chair of the Oracle board of directors.
Oracle submitted a filing to the SEC on September 24, revealing that it sold bonds for $18 billion.
Oracle raising so much debt and being in negative cash flow territory means that the company has to get all the money it expects from its customers, OpenAI first and foremost.
The problem is that OpenAI is currently trying to make a deal with Nvidia for an AI data center with a power of 10GW, which is more than double the capacity compared to OpenAI’s agreement with Oracle.
Related: Nvidia OpenAI blockbuster deal raises major questions
The estimated cost for OpenAI could go up to $500 billion, and the company doesn’t have money for either deal. Its annual recurring revenue will only surpass $20 billion this year and the company isn’t profitable. Furthermore, it’s unclear how the potential OpenAI deal with Nvidia will affect Oracle’s deal with OpenAI.
Rothschild Redburn stuns with initial Oracle rating
Rothschild & Co. Redburn analyst Alex Haissl initiated coverage of Oracle. Haissl gave ORCL stock a sell rating and a $175 price target.
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Rothschild Redburn thinks the market overvalues Oracle’s contracted cloud revenues. To them, the Oracle’s role looks closer to that of a financier than a cloud provider when it comes to single-tenant, large-scale deployments.
Related: Oracle slips on reports of unexpected debt plan
They believe that Oracle’s five-year cloud revenue guidance equates to $60B in value, showing that the market is already pricing in a “risky blue-sky scenario that is unlikely to materialize,” according to TheFly.
Key takeaways:
- Rothschild & Redburn gave Oracle a sell rating
- Alex Haissl set ORCL price target at $175
- Oracle raised $18 billion via bonds
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