Oracle: Irrational Post-Earnings Sell-Off As AI Growth Pipeline Remains Intact
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Deep Value Investing9.89K FollowersFollow5ShareSavePlay(10min)Comment(1)SummaryThe core of my bull thesis is that Oracle's real growth inflection is back-end loaded to mid-2027, driven by the $300B, five-year OpenAI contract and strong OCI/AI infrastructure momentum.Despite the double-digit sell-off in Q2 after the company missed top-line estimates, the growth story remains unchanged.I see strong demand signals. RPO reached $523.3B, up 433% yoy, and FY26 CapEx guidance was lifted by $15B to $50B.CapEx will be funded by debt, but that doesn't undermine the growth story. That said, I see risks with widening CDS spreads and potential downgrades toward BBB-.
Getty Images In my last coverage on Oracle Corporation (ORCL), I rated the stock a cautious buy as the market digested the $300B OpenAI deal. Since then, credit spreads have widened on fears around Oracle's debt strategy and the uncertaintyThis article was written byDeep Value Investing9.89K FollowersFollowSmall deep value individual investor, with a modest private investment portfolio, split approx. 50%-50% between shares and call options. I have a B.Sc. in aeronautical engineering and over 6 years of experience as an engineering consultant in the aerospace sector. The latter statement is not relevant in any way whatsoever to my investment style, but I thought to add it for self-indulgent purposes. I have a contrarian investment style, highly risky, and often dealing with illiquid options. How illiquid? Well, you can land a Jumbo on the spread and still have clearance for take-off. From time to time, I buy shares, mostly to not be categorized as a degen by my fellow investor friends, therefore the 50%-50% allocation. My timeframe tends to be between 3-24 months.I like stocks that have experienced a recent sell-off due to non-recurrent events, particularly when insiders are buying shares at the new lower price. This is how I often screen through thousands of stocks, mainly in the US, although I may own shares in banana republics. I use fundamental analysis to check the health of companies that pass through my screening process, their leverage, and then compare their financial ratios with the sector, and industry median and average. I also do professional background checks of each insider who purchased shares after the recent sell-off. I use technical analysis to optimize the entry and exit points of my positions. I mainly use multicolor lines for support and resistance levels on weekly charts. From time to time I draw trend lines, taken for granted, in multicolor patterns. Note: I tried to keep my introduction as real, and authentic as possible. I dislike empty suits, high-level BS, deep-level BS, unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority.Thanks for reading my introduction!Analyst’s Disclosure:I/we have a beneficial long position in the shares of SOXL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsHow does Oracle's raised CapEx guidance affect its growth outlook?Oracle's FY26 CapEx guidance increased by $15B to $50B, reflecting strong demand for cloud infrastructure and positioning ORCL for continued growth into 2026 and beyond.What is the significance of Oracle's RPO growth versus unchanged FY26 revenue guidance?While RPO jumped 433% YoY to $523.3B, FY26 revenue guidance remains at $67B, suggesting most incremental revenue from new contracts will materialize in FY27 and later.How material is the OpenAI contract to Oracle's forward revenue trajectory?The $300B, 5-year OpenAI contract, starting in 2027, is expected to drive a meaningful acceleration in ORCL's top-line growth beginning fiscal 2028.Recommended For You