Market Minute: Will Oracle (ORCL) Earnings Show Massive AI Capex Is Paying Off?
While Oracle (ORCL) plans to spend roughly $50B in fiscal 2026 as it ramps up development of its massive Stargate AI infrastructure projects, its earnings report this week will show if its growth can counterbalance the spending.
The technology sector’s extreme spending spree continues to grow alongside the artificial intelligence boom, and Oracle’s spending is a notable outlier as its quarterly earnings loom in Wednesday’s postmarket. The cloud software giant’s capex figure announced in March was a more than sevenfold increase from fiscal 2024; analysts at BNP Paribas expect that fiscal 2027 capex guidance could surge to between $80B to $100B as Oracle ramps up its mega AI infrastructure project.
Another focus will be its remaining performance obligations and debt on the earnings report. The cloud computing company’s remaining performance obligations (RPO) increased by a massive 325% to $533B last quarter. Oracle has a $300B, five-year cloud deal with OpenAI that was announced last September with capacity coming online in 2027. Oracle is taking on massive debt to build new data centers ahead of this with revenues expected to begin flowing next year.
Here’s what traders need to know about Oracle:
- Earnings: Analysts are looking for earnings per share of $1.96 against last year’s figure of $1.70 (+15.3%). Expectations for revenue come in at $19.08B vs. $15.90B year-over-year (+20.0%). A Jefferies report said key fourth-quarter numbers for Oracle could include 90% growth in Oracle Cloud Infrastructure as well as $36B in incremental net remaining performance obligations, which represents new business added.
- Analysts: Analysts are largely bullish on Oracle. Bank of America Tuesday raised its price target on Oracle to $240 from $200 and kept its buy rating. On Monday, Evercore ISI raised its target to $245 from $220 and kept its outperform rating, while TD Cowen raised its target to $300 from $250. Oppenheimer, RBC Capital, Cantor Fitzgerald, Citigroup and others also hiked their Oracle price targets in recent days.
- Technicals: Oracle shares spiked up to 250.25 on June 1 but rapidly sank to a supportive area near 210 that matches up with old highs from early January. However, an uptrend is still in play beginning from the 52-week lows of 134.57 on Apr. 10 and connecting subsequent lows from late April and late May. Price closed below the weekly 5-day exponential moving average that sits on Jun. 5 and is presently near 221 but remains above monthly 21-day EMA which comes in near 207. The long-term yearly 251-day EMA is roughly in confluence with the quarterly 63-EMA and presents a notable supportive area for traders to consider near about 190. Meanwhile, the yearly Volume Profile shows this also is a major area of heavy trading, with the Point of Control coming in at about 197, so there’s even more emphasis on this as a significant downside area. Volume thins significantly above 250, so traders could see fast-moving prices beyond this area. This morning’s expected move information according to the options chain gives a potential range of +/-27 for the weekly expiration of Jun. 12 that will capture earnings for a potential move of 12.8%. The range comes in it+/-31.8 for the Jun. 18 monthly expiration, which is about 14.8%; this suggests a break above the recent peak near 250 is not expected by traders.
Economic data (ET)
- 6:00AM: NFIB Business Optimism Index (May)
- 8:15AM: ADP Employment Report
- 8:30AM: Balance of Trade
- 8:55AM: Redbook
- 10:00AM: Existing Home Sales
Earnings
- Premarket Tuesday: J.M. Smucker (SJM), SailPoint (SAIL)
- Postmarket Tuesday: Casey’s General Stores (CASY), Cracker Barrel (CBRL)
- Premarket Wednesday: Chewy (CHWY)
- Postmarket Wednesday: Oracle (ORCL), Stitch Fix (SFIX)
