Have you ever watched a stock you thought was bulletproof suddenly drop 11% in the blink of an eye and wondered if the entire market has lost its mind? That’s exactly what happened with Oracle this week.
One minute everyone is talking about the company’s monster AI backlog and multi-year cloud deals, the next minute shares are getting obliterated because revenue came in a hair light and free cash flow looked like a horror movie. I’ve been through plenty of these post-earnings bloodbaths, but this one felt… different. Confusing. Almost bipolar.
So I spent the morning digging through every single analyst note I could find (and trust me, there were a lot). Here’s the unfiltered truth about what really happened, why the market freaked out, and—most importantly—whether this dip is the buying opportunity of the year or the start of something uglier.
The Quarter in One Brutal Sentence
Oracle grew revenue 13% constant currency, cloud infrastructure exploded 66%, the company raised next year’s revenue guidance again, and yet the stock still got absolutely crushed because software licenses shrank, cash flow went negative $10 billion, and capex is now completely off the charts.
That single sentence basically sums up the entire schizophrenic reaction on Wall Street right now.
What Actually Missed (and Why It Spooked Everyone)
Let’s be crystal clear about the numbers that triggered the sell-off:
- Total revenue: $16.06 billion vs $16.21 billion expected (tiny miss, but still a miss)
- Software/license revenue: down 3% to $5.88 billion (well below the $6.06 billion hope)
- Free cash flow: negative ~$10 billion (almost double the negative $5.2 billion consensus)
- Capex in the quarter: $12 billion—$4 billion above what anyone modeled
Those are the headlines that sent shares spiraling after hours. But here’s where it gets interesting: almost none of the analysts actually changed their long-term thesis. They just slashed price targets and said “yeah, this is going to be messy for a while.”
The $523 Billion Question Mark Everyone Is Obsessing Over
Oracle keeps waving around this gigantic remaining performance obligations (RPO) number—currently $523 billion—as proof that the AI rocket ship is fully fueled. Management says a huge chunk of that will convert into revenue over the next few years, especially as hyperscalers and enterprises need more and more GPUs.
The problem? Investors have zero visibility into when that happens, how profitable it will be, and whether Oracle can finance the insane buildout without drowning in debt or diluting shareholders.
“Investors need greater confidence that the emerging GPUaaS business will be accretive to earnings and free cash flow before underwriting out-year targets.”
– Keith Weiss, Morgan Stanley
That quote basically captures the entire mood right now. Everyone sees the potential. Everyone is terrified of the execution risk.
Why Capex Is the New Religion (and Terror) on the Street
Oracle just raised FY27 capex guidance by another $15 billion. Let that sink in. They’re now planning to spend something approaching $100 billion—maybe less, management says “meaningfully less,” but still an eye-watering number—to build out AI data centers.
In my experience, when a mature software company suddenly starts spending like a 2021-era crypto startup, two things happen:
- Near-term margins and cash flow get absolutely torched
- Long-term believers load up because they’re convinced the spend today prints money tomorrow
We’re watching that movie play out in real time.
The Analyst Scorecard: Still Mostly Bullish (For Now)
Despite the carnage, the vast majority of major firms kept their buy or overweight ratings. Price targets came down—sometimes sharply—but the median target still sits well above where the stock closed yesterday.
Here’s a quick snapshot of where the big names landed:
| Firm | Rating | New Target | Implied Upside |
| JPMorgan | Neutral | $230 | ~3% |
| Wells Fargo | Overweight | $280 | ~26% |
| Bank of America | Buy | $300 | ~35% |
| Barclays | Overweight | $310 | ~39% |
| Morgan Stanley | Equal-Weight | $320 | ~43% |
| UBS | Buy | $325 | ~46% |
| Bernstein | Outperform | $339 | ~52% |
| Citi | Buy | $370 | ~66% |
| Deutsche Bank | Buy | $375 | ~68% |
Notice anything? Even the most “cautious” new targets are still calling for meaningful upside from here. That tells you the Street hasn’t given up on the story—they’ve just lost patience with the timing.
Three Possible Paths From Here
In my view, Oracle stock has three realistic trajectories over the next 12-24 months:
- The Amazon/AWS Replay
Heavy capex today → dominant AI cloud position tomorrow → margins rebound hard → multiple expands → shareholders get rich. This is the bull script almost everyone is banking on. - The Cisco 2000 Nightmare
Builds aggressively for demand that partially materializes → gross margins stay depressed forever → growth slows → stock languishes for a decade. Bears whisper this one in dark corners. - The Muddy Middle (Most Likely)
Lumpy quarters, constant debates about ROIC, periodic 10-20% drawdowns, but gradual progress on revenue acceleration and eventual margin recovery. Stock grinds higher over years, not months.
My money is on door number three. It’s rarely clean when a 45-year-old enterprise giant tries to reinvent itself as an AI infrastructure powerhouse.
So Should You Buy the Dip?
If you’re a long-term investor with a 3-5 year horizon and you believe AI training and inference demand is going to be measured in tens of billions of GPUs, then yes—this pullback looks like noise.
If you need smooth quarterly progress, pristine free cash flow, and hate volatility, Oracle is going to drive you insane for the foreseeable future.
“If you build it, they will come. But you have to build it first.”
– Brad Sills, Bank of America
That line from Bank of America pretty much nails it. Oracle is in the “ugly middle” phase of the biggest transformation in its history. The destination still looks incredibly compelling. The road, though? Buckle up.
Personally, I added a little on this dip. Not because I think the stock rips 50% tomorrow—honestly, it might go lower first—but because the risk/reward at current levels feels skewed in favor of anyone patient enough to zoom out past 2026.
The AI infrastructure land grab is just getting started. Oracle has real shots on goal with some of the biggest players on the planet. That’s worth something, even if the next few quarters are messy.
As one analyst put it: “Expect a bumpy ride, but we remain focused on the long term.”
Couldn’t have said it better myself.
