Can Oracle's stock reverse its decline? Two key points to watch in next week's earnings report

Oracle will release its second-quarter financial report next Wednesday. Its stock price has recently come under pressure due to massive investments in the AI sector and reliance on OpenAI. The enterprise technology giant has a market capitalization of $807.7 billion, and its stock price has fallen more than 35% since hitting an all-time high in September, currently testing the 200-day moving average. Despite facing financing pressures, analysts believe the upcoming financial report may alleviate investor concerns in two key areas.

TD Cowen analyst Derrick Wood maintains a buy rating on Oracle stock with a target price of $400. He noted that the second quarter should be the first quarter where Oracle Cloud Infrastructure (OCI) growth begins to accelerate, with the Abilene data center going live, further boosting growth in the second half of the year.

This positive expectation stems from Oracle's collaboration with OpenAI to build a large "Stargate" data center project in Abilene, Texas. The project is progressing smoothly and will help the company release capacity to meet the massive backlog of orders in its cloud infrastructure business.

The company's management will also provide more details on capital expenditures and financing needs. Wood believes that actual demand may be lower than market consensus expectations, which will help alleviate investor concerns about debt burdens.

Cloud Business Growth Expected to Accelerate Significantly

Wood expects significant acceleration in OCI business growth. Over the past four quarters, the growth rate for this business has been around 51%-54%, and it is expected to rise to about 65% in the second quarter, approximately 80% in the third quarter, and potentially reach around 100% in the fourth quarter.

Industry surveys indicate that the Abilene data center project is progressing as planned. This progress is crucial for Oracle, as the company needs to meet the substantial backlog of cloud infrastructure orders.

In September, Oracle's stock price surged after the first-quarter financial report, when the company disclosed that the remaining performance obligations (RPO) for the quarter ending in August skyrocketed by 359% to $455 billion.

According to The Wall Street Journal, this backlog includes a $300 billion cloud infrastructure agreement signed with OpenAI. This backlog is seen as a clear signal of Oracle's successful entry into the cloud infrastructure market dominated by Amazon, Microsoft, and Alphabet, Google's parent company.

Concerns Over Capital Expenditures Expected to Ease

However, Oracle's stock price subsequently retraced all gains from September, as investors worried about how the company would fund the data center construction needed to meet demand. Oracle has turned to debt financing through bond issuance and has significantly increased capital expenditures.

Wood stated, "For the past two months, capital expenditures and financing needs have been the biggest questions for investors, dragging down the stock price. Lower-than-expected capital expenditures will also lead to lower debt needs, and we believe these concerns can be addressed in the conference call, including a commitment to maintain investment-grade debt levels."

Oracle's recent stock price is around $211.52, just below the 200-day moving average, and has remained below this level since November 20. Year-to-date, the stock price is still up 28%, but it has fallen more than 35% from the September all-time high

Analysts expect Oracle's earnings per share for the second fiscal quarter to be $1.29, a year-on-year increase of 12.2%. In the past four quarters, the company has met or exceeded Wall Street expectations three times and missed once. The earnings per share for the first fiscal quarter was $1.20, exceeding expectations by 4.4%.

For the fiscal year 2026, analysts expect Oracle's earnings per share to be $5.41, a year-on-year increase of 23%; for the fiscal year 2027, a further growth of 19.4% to $6.46 is expected