Oracle. The name conjures images of enterprise software, not exactly cutting-edge AI. But the narrative has shifted, with Oracle positioning itself as a key player in the AI gold rush. The question is: does the data support the hype, or is this just another tech stock riding the AI wave?
The recent volatility in ORCL stock price – a 30% drop in a month, followed by a bounce – has created what some are calling a buying opportunity. Analysts point to Oracle's remaining performance obligations (RPOs) ballooning to $455 billion, a staggering 359% increase year-over-year, fueled by demand for Oracle Cloud Infrastructure. This figure seems impressive, and it is, but the devil's in the details.
Decoding the RPO Explosion
Let's dissect that $455 billion RPO. One analyst noted that OpenAI accounted for "almost the entire increase" in Oracle's backlog after earnings were reported on September 9, 2025. Since then, OpenAI has announced over $1 trillion in AI data center contracts. The analyst suggests that OpenAI may not be a "serious counterpart and that Oracle was a pawn in the grand game of fake it 'till you make it."
That's a bold claim. So what's the data say?
The problem is, we don't have the specifics of the Oracle-OpenAI deal. How much of that $455 billion is actually guaranteed revenue? How much is contingent on OpenAI hitting certain milestones? Details on the contract's structure remain scarce, and that lack of transparency should make investors wary.
Here's where I get skeptical (and this is the part of the report that I find genuinely puzzling). Oracle's capital expenditures have skyrocketed. One source notes capex spending jumped from $7.855 billion to $27.414 billion in the latest trailing twelve-month (TTM) period. That's an increase of roughly 250%. In Q1 2026 alone, capex was $8.5 billion, eclipsing the $8.14 billion in operating cash flow, resulting in negative free cash flow.
Oracle is betting big on AI infrastructure, no doubt. But are they overspending based on a potentially inflated RPO figure? Or are they laying the groundwork for massive future growth?
The Options Market Signals Uncertainty
The options market provides another layer of insight. There's been unusual activity in deep out-of-the-money (OTM) put options on ORCL, expiring in over a year (December 18, 2026) with a strike price of $105. These bets only pay off if ORCL stock falls by nearly 50%. Unusual Activity in Oracle Corp Put Options Highlights ORCL Stock's Value. These bets only pay off if ORCL stock falls by nearly 50%.
Now, the existence of these puts could be interpreted as a bullish sign. After all, the short-sellers of these puts are collecting a premium, betting that ORCL won't crash. However, it also suggests that some investors believe a significant downside risk exists. It's a hedge, a safety net in case the AI narrative crumbles.
The analyst community is largely bullish. The average 12-month price target is around $322, implying a potential upside of 61%. However, analyst price targets are often lagging indicators, reflecting past performance more than future prospects.
Moreover, valuation is relative. ORCL stock currently trades at around 46 times earnings, while its forecast growth rate (including OpenAI revenue) is only about 23% per year. That puts its PEG ratio at 2.0, which is high. If the OpenAI orders don't fully materialize, Oracle could be overvalued.
Oracle's AI Hype: Smoke and Mirrors?
Oracle's AI push could be a game-changer. But right now, it looks like a high-stakes gamble. The lack of transparency around the OpenAI deal, the soaring capital expenditures, and the conflicting signals from the options market all point to significant uncertainty. The recent stock price drop may represent a buying opportunity, but it's crucial to acknowledge the risks. Caveat emptor.