Can Oracle stock reverse its decline? Two major highlights in next week's earnings report worth watching

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Oracle will release its Q2 financial report next Wednesday, and its stock price has recently come under pressure due to massive investments in the AI field and reliance on OpenAI. The enterprise tech giant has a market cap of $807.7 billion, and its stock price has dropped more than 35% since reaching a historical high in September, currently testing its 200-day moving average. Despite facing funding pressures, analysts believe the upcoming financial report could alleviate investor concerns in two key areas.

TD Cowen analyst Derrick Wood maintains a “Buy” rating on Oracle stock and a price target of $400. He points out that Q2 should be the first quarter in which Oracle Cloud Infrastructure (OCI) starts to accelerate growth, and with the Abilene data center coming online, growth will further pick up in the second half of the year.

This positive outlook comes from Oracle's large “Stargate” data center project in Abilene, Texas, developed in cooperation with OpenAI. The project is progressing smoothly and will help the company boost capacity to meet the massive backlog of cloud infrastructure orders.

Management will also provide further details on capital expenditure and funding needs. Wood believes actual demand may be lower than market consensus, which could help ease investor concerns about the debt burden.

Cloud Business Growth Expected to Accelerate Sharply

Wood expects OCI business growth to see a significant acceleration. In the past four quarters, growth was about 51%-54%; Q2 is expected to reach around 65%, Q3 about 80%, and Q4 possibly about 100%.

Industry surveys show the Abilene data center project is progressing as planned. This is crucial to Oracle, as the company needs to satisfy a huge backlog of cloud infrastructure orders.

In September this year, Oracle’s stock price surged after its Q1 report, when it disclosed that Remaining Performance Obligations (RPO) for the quarter ending in August soared 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 that Oracle has successfully entered the cloud infrastructure market dominated by Amazon, Microsoft, and Google’s parent company Alphabet.

Capital Expenditure Concerns Likely to Ease

However, Oracle’s stock price subsequently gave back all its gains from September, as investors worried about how the company would finance the construction of data centers needed to meet demand. Oracle has resorted to debt financing through bond issuance and has significantly increased capital spending.

Wood said, “For the past two months, capital expenditure and funding needs have been the biggest questions for investors and have weighed on the stock price. Lower than expected capital expenditure will also lead to lower debt needs. We believe these concerns can be addressed in the conference call, including commitments to maintain investment-grade debt levels.”

Oracle’s recent stock price is around $211.52, just below its 200-day moving average, and has stayed below that level since November 20th. Year to date, the stock is still up 28%, but more than 35% down from its September all-time high.

Analysts expect Oracle Q2 earnings per share to be $1.29, up 12.2% year on year. In the past four quarters, the company met or exceeded Wall Street expectations three times, and missed once. Q1 earnings per share were $1.20, beating expectations by 4.4%.

For fiscal year 2026, analysts expect Oracle earnings per share of $5.41, an increase of 23%; for fiscal year 2027, further growth of 19.4% to $6.46.

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