Oracle (ORCL 2.46%) stock is trading down about 42% from where it was before it announced its fiscal 2026 first-quarter results on Sept. 9, which included news of a blockbuster $300 billion deal with OpenAI. Following the release of Oracle's latest quarterly results on Dec. 10, which showcased all-time high results and an upbeat forecast, the stock sold off about 15%. Despite two strong earnings reports, investors are wary.
Let's look at what's dragging down Oracle stock, and see if investors should be concerned about the growth stock in December and in 2026.
A data center under construction. Image source: Getty Images.
Oracle is taking market share in cloud infrastructure
Oracle added $68 billion in remaining performance obligations (RPO) in fiscal 2026's Q2 with the help of new commitments from Meta Platforms, Nvidia, and other companies. RPO increased by 15% compared to the first quarter and is now a staggering $523 billion. Customers continue to line up for space on Oracle Cloud Infrastructure (OCI). However, to unlock those orders, Oracle must establish an extensive and innovative network of data centers.
Oracle's approach to cloud is unique because it is building its own public cloud through OCI and embeds native versions of its infrastructure, such as Oracle Autonomous Database and Oracle Exadata Database Service into Amazon Web Services, Microsoft Azure, and Alphabet-owned Google Cloud to improve performance and cut down on latency.
This approach is ideally suited for high-performance computing, especially for customers who already use Oracle's database services. By natively integrating its services within a third-party host cloud, such as AWS, Azure, or Google Cloud, Oracle effectively eliminates the crucial and costly step of moving large data sets between clouds. The strategy encourages customers to utilize Oracle's database services regardless of their cloud provider.
For context, Oracle had built 23 multicloud data centers as of August 31, and raised that to 34 as of Nov. 30. Oracle management said the company was more than halfway to completing its goal of building 72 multicloud data centers for the fiscal year (ending in late May 2026).
NYSE: ORCL
Key Data Points
Buying Oracle stock for the right reasons
Oracle's stock price is falling because its infrastructure build-out is expensive and time-consuming. There's also concern that Oracle may not be able to realize the full $523 billion RPO if customers overestimate their capacity needs. But even if some key customers, like OpenAI, don't realize the full scale of their bookings, Oracle could still fill the void from a different customer. However, if there is a downturn in AI, Oracle could be caught flat-footed with excessive infrastructure and debt, as well as insufficient free cash flow.
While those fears are warranted, the bigger question investors should be asking is whether Oracle is making the right long-term move. Oracle's spending has taken a toll on its balance sheet. However, it's challenging to envision its data centers becoming bridges to nowhere. Investors who are optimistic about increased demand for artificial intelligence (AI) should focus more on what Oracle is building rather than who is buying the space.
Oracle is a high-conviction buy
Oracle is out of favor because investors want to see the company convert RPO into real revenue. If AI spending slows, Oracle could find itself overleveraged in the near term. However, it's worth noting that while cloud is Oracle's fastest-growing segment, Oracle still has a massively profitable software business outside of the cloud.
All told, the sell-off in Oracle is a buying opportunity for risk-tolerant investors who agree with Oracle's strategy and don't mind enduring some potentially large speed bumps along the way.
