Battered Oracle May Be Poised for Rally as Investors Renew Software Bets

Shares in Oracle have tumbled 18.5% this year and, in July, ratings agency S&P Global downgraded the company’s credit rating to one notch above junk status. Oracle has been dogged by broader concerns about the software sector, as well as the debt pile it’s amassing in pursuit of becoming a major AI cloud hyperscaler alongside Microsoft, Amazon and Google.

So, naturally, in advance of the company’s upcoming earnings report on Thursday, some analysts see a golden buying opportunity.

The Big Fundamentals

Investor concerns about Oracle center on spending and debt. The evidence to justify them is easier to spot than a California transplant in Austin, where the company is headquartered.

Oracle’s June earnings release revealed negative free cash flow of $23.7 billion in the 2026 fiscal year. Revenue was devoured by capital expenditures, mostly in connection with AI buildout plans that include future data center leases totaling $260 billion. Financing those plans to build enormous amounts of new cloud infrastructure pushed Oracle’s debt pile up to $129.5 billion. 

But Jefferies analysts argued last week that Oracle’s fundamentals deserve a second look. Quarterly revenue growth finished the 2026 fiscal year at 21% after starting the year at 12%. Oracle’s contracted backlog rose a whopping 363% in the 2026 fiscal year to a record $638 billion. Revenue climbed 17% to $67 billion. With “most bad news priced in,” the stock may be on the cusp of a buying opportunity:

• While they cut their price target to $290 from $320, that still suggests an 82% upside from Friday’s $158.78 closing price.
• Morgan Stanley analysts said Oracle could report annualized cloud revenue growth of up to 63% in its most recent quarter, driven by its GPU-as-a-service business, in what would act as a “good setup” for the stock.

Good News From Rivals: Cloud providers Nebius Group and CoreWeave recently offered optimistic commentary on AI pricing, which Morgan Stanley said bodes well for Oracle’s earnings. A recent run of rallies by rival software firms is another good sign, as investors have shown renewed interest in the beaten-down sector. Salesforce, Okta and Snowflake all jumped 17% or more after reporting across-the-board earnings beats in the past two weeks.