When it comes to Oracle (ORCL 2.46%) stock, optimism surrounding its AI infrastructure has given way to deep worry. The stock spiked after Oracle announced a deal with OpenAI and a massive backlog, which has since grown to $523 billion.
However, the spending required to capture that business has led to mounting debts and rising share counts, prompting investors to sell the stock. Consequently, the stock has struggled since the announcement of the OpenAI deal last fall.
Amid that discount, should investors buy into Oracle, or are they better off staying on the sidelines?
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Oracle as an AI company
On the surface, Oracle stock looks like a no-brainer, as its aforementioned $523 billion backlog is up by 438% yearly.
Still, the challenges for Oracle stock appear to hinge on that backlog. Oracle has taken on massive debts to serve more customers, and as of the second quarter of fiscal 2026, it held around $108 billion in debt, a tremendous burden for a company with just $30 billion in book value.
Moreover, Oracle pledged to raise $45 billion to $50 billion, presumably to spend on capital expenditures (capex). That is far below Amazon's planned $200 billion in capex spending or the capex budget of other "Magnificent Seven" companies this year. Still, some analysts have speculated as to whether OpenAI can honor its agreement, and it could spell trouble for Oracle if OpenAI backs away from the deal.
Where Oracle stock stands
Amid the aforementioned struggles, the question for investors is whether the struggles present a buying opportunity. For now, Oracle trades at a discount of more than 55% from its 52-week high.
NYSE: ORCL
Key Data Points
Additionally, even with increasing debts and capex spending, Oracle has undoubtedly benefited from the rising demand for high-performance computing, and its approach has been cost-effective for its customers. Such attributes led to the monster revenue backlog and, by extension, its market share in the cloud market.
Due to those gains, revenue in the first six months of fiscal 2026 (ended Nov. 30) rose 13%, including a 31% surge in cloud segment revenue over that period. Also, despite the capex spending, it has limited the growth in operating expenses, allowing profits to rise 49% yearly to just under $9.1 billion for the first half of the fiscal year.
Also, thanks to the pullback, its P/E ratio has fallen to 28, just below the S&P 500 average of 29. When also considering its 20 forward P/E ratio, investors have an increased incentive to buy the stock despite the heavy debt burden and the uncertainty surrounding the OpenAI deal.
Oracle stock is a buy
Given the improving financials and falling valuations, Oracle stock is likely a buy.
Investors may need to reevaluate Oracle if the OpenAI deal falls apart. Also, with the stock price continuing to fall, prospective shareholders should probably accumulate shares slowly.
However, investors should remember that Oracle has a huge backlog even without the OpenAI deal. With its cloud business firing on all cylinders, investors could earn market-beating gains by buying shares now.
