What a difference a few months can make, as long-term investors in Oracle (NYSE:ORCL) can sadly attest to. The company’s share price has dropped just over 50% during the past half year.
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The euphoria over Oracle’s stunning remaining performance obligations at the end of fiscal 2026 Q1 in September – when it announced $455 billion, an increase of 359% – isn’t the prevailing narrative. Even though this number actually increased to $553 billion as fiscal 2026 Q3 concluded, that’s no longer enough.
Clearly, the market wants to see evidence that these numbers are turning into sales. However, there’s another concern, one that is rooted in the huge amounts of capex that Oracle needs to deploy to meet this demand.
Top investor Daniel Sparks understands that this is a “costly AI gamble,” but it’s one that could work out nicely.
“For investors who believe the AI infrastructure boom is still in its early innings, this massive pullback offers a very reasonable entry point,” explains the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.
That said, it’s not a risk-free proposition. After all, Sparks notes that the company is planning on raising up to $50 billion in debt and equity financing in 2026 to fund the buildout. That raises the company’s risk profile, he points out.
Moreover, Oracle is pursuing a restructuring plan that is cutting thousands of jobs. That’s an additional weight on its finances and flexibility, argues Sparks.
Of course, all that unease is underscored by the fear that Oracle is becoming overleveraged during a time of dynamic change. It represents a worry that AI demand could slow down, leaving Oracle with both “massive debt and underutilized data centers.”
On the other hand, it’s not like Oracle is building out “blindly,” and the investor also points out that much of the new capacity is backed by customer contracts. Moreover, Oracle has stated that some of the funding is being supplied upfront via customer prepayments or that customers are buying the GPUs directly.
In Sparks’ mind, Oracle is therefore a “high-risk, high-reward AI play.” However, he still offers some words of caution for those looking to take advantage of the depressed share price.
“If you decide to buy the dip, however, it might be wise to keep your position relatively small until Oracle proves it can successfully turn that massive backlog into robust, sustained free cash flow,” concludes Sparks. (To watch Daniel Sparks’ track record, click here)
Wall Street certainly believes that now’s the time to buy. With 27 Buys and 5 Holds, ORCL enjoys a Strong Buy consensus rating. Its 12-month average price target of $245.11 points to gains north of 70%. (See ORCL stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.