월가가 오라클(ORCL.US)의 분기 실적 발표를 앞두고 AI 자본지출 지속 가능성에 대한 우려 속에서 CEO 래리 엘리슨을 향한 감시를 강화하고 있다.

Oracle is set to release its Q1 FY2027 financial report this week, concluding what has been one of the most turbulent 12 months in the company’s 49-year history.

A year ago, Oracle’s Q1 results triggered a record single-day share rally of 36%. The Austin, Texas-based tech giant reported that remaining performance obligations (RPO) surged 359% to $455 billion. This backlog was largely driven by a $300 billion agreement with ChatGPT developer OpenAI, a partnership widely viewed as a milestone endorsement of Oracle’s transformation from a traditional database software provider into a cloud powerhouse.

The landscape has shifted dramatically since then. Oracle and Chairman Larry Ellison have become central figures in the debate over artificial intelligence spending. A recent profile in The New York Times Magazine questioned whether Ellison, one of the world’s wealthiest individuals, might become “the poster child of the AI bubble.”

Market anxiety over the massive capital required for Oracle’s AI ambitions has pushed its shares down more than 50% from their September all-time high. Rebound attempts over the past year have largely failed, and Oracle’s relative strength line against the S&P 500 now sits at just 12 out of 99, signaling notable weakness.

This week’s earnings report will serve as another critical test of market confidence in AI infrastructure development. Recent results from Nvidia (NVDA.US), Amazon (AMZN.US), Microsoft (MSFT.US), and Alphabet (GOOGL.US) have all underscored sustained demand for compute infrastructure.

Paul Meeks, Managing Director and Head of Technology Research at Freedom Capital Markets, characterized Oracle’s AI push as an “extreme case of a good thing turned bad.” He noted: “The good news is this sleeping giant has been woken up, with revenue accelerating markedly; the bad news is, to support its ambitions, free cash flow has been negative for five quarters straight.”

On the revenue front, Oracle’s AI investments are delivering immediate returns. Total revenue grew 17% in FY2026, a sharp acceleration from the 5.4% compound annual growth rate recorded between FY2019 and FY2025. The company also issued FY2027 sales guidance of $90 billion, implying growth exceeding 30%.

The primary catalyst is Oracle Cloud Infrastructure (OCI), which is positioned to compete directly with Amazon, Microsoft, and Google. OCI generated $18 billion in revenue during FY2026, a 77% year-over-year increase. Strong cloud demand further propelled Oracle’s RPO—contracted but unrecognised revenue—to $638 billion as of May.

However, this growth comes at a steep cost. To accommodate clients like OpenAI, Oracle is constructing 4.5 gigawatts of data center capacity. While operating cash flow rose 54% to $32 billion in FY2026, capital expenditures more than doubled to $55.6 billion, resulting in a negative free cash flow of $23.7 billion. By contrast, just two years earlier, Oracle posted a positive free cash flow of $11.8 billion alongside $6.9 billion in capex.

To bridge the funding gap, Oracle announced in February plans to raise $50 billion through debt and equity financing. CFO Hilary Maxson stated in June that FY2027 capital expenditures will reach $90–95 billion, with up to $25 billion offset by customer prepayments for cloud services.

Oracle is also shifting some costs to customers by allowing them to purchase advanced compute chips directly. Nevertheless, FactSet data indicates analysts expect Oracle’s trailing twelve-month free cash flow to remain negative through at least FY2030.

Sustained capital expenditures and continuous cash burn are already weakening Oracle’s credit fundamentals. In July, S&P Global Ratings downgraded the company’s credit rating from BBB to BBB-, leaving it just one notch above junk status.

In its rating report, S&P stated bluntly: “Oracle’s rapidly expanding AI infrastructure business is increasing its overall credit risk, reflecting our more cautious view of the AI infrastructure sector, including rising capex requirements, uncertain profitability paths, a rapidly evolving competitive landscape, and high customer concentration.” The agency specifically highlighted that OpenAI accounts for “about half” of Oracle’s RPO, making the stock highly sensitive to developments at the AI startup.

Last September, Oracle executed a rare leadership restructuring that intensified corporate upheaval. Clay Magouyrk and Mike Sicilia were appointed co-CEOs, while long-serving CEO Safra Catz transitioned to executive vice chairman. The company also appointed a new CFO in April.

While Ellison’s core leadership team remains committed to heavy AI investment, investors are closely watching whether management can balance aggressive growth with financial discipline.

Meeks observed that Oracle has traditionally attracted “value investors” seeking stable cash flows and consistent dividends. “They want a tortoise, not a hare. But now this company wants to be a hare.” This shift in investor profile, compounded by deteriorating fundamentals, explains the stock’s sharp retracement.

The upcoming earnings release will provide Oracle another platform to articulate its vision ahead of its annual “AI World” customer conference in Las Vegas, scheduled for late October.

Aggregated analyst data projects adjusted EPS of $1.73 for the quarter, with revenue forecast at $19.1 billion, representing 28% year-over-year growth compared to last year’s 11% pace.

The divergence between revenue and profit growth warrants scrutiny. While revenue is expected to surge 28%, adjusted EPS is projected to rise only 18.5%, indicating that Oracle is deliberately compressing short-term margins to fund rapid cloud infrastructure expansion.

This dynamic contrasts sharply with hardware suppliers. For instance, Micron Technology (MU.US) is expected to see FY2026 revenue jump 246% and EPS climb more than 840%, benefiting from strong AI storage chip demand and pricing power. Oracle, by comparison, is effectively “paying the bill for the feast.”

Despite these headwinds, Wall Street remains broadly optimistic. Data shows 80% of analysts maintain a “buy” or equivalent rating on Oracle, up from 67% a year ago. Among 45 coverage peers, 42 rate it “buy,” eight “hold,” and only one “sell.”

Jefferies analyst Brent Thill reiterated his “buy” rating but lowered his price target from $320 to $290. He characterized Q1 as Oracle’s “seasonal weak quarter” but argued that “the stock is overly punished and the risk/reward looks attractive.” Investors will likely scrutinize OCI growth, which is expected to accelerate to 115%, alongside updates on data center construction.

Morgan Stanley slightly raised its price target from $207 to $210, maintaining an “equal-weight” (neutral) rating. Analyst Sanjit Singh acknowledged that Oracle’s transition to a cloud infrastructure leasing model still has “a long way to go,” but noted that with the stock down 25% since June’s earnings, “given the in-quarter share price performance and current valuation, there’s a tactical constructive setup ahead of earnings.”

BofA Securities analyst Tal Liani remained more bullish, reiterating his “buy” rating and $240 price target. In a client note, he wrote: “Although Oracle’s stock narrative is mainly focused on its cloud infrastructure business, we believe the traditional software segment remains an integral part of the investment case. We expect Q1 cloud SaaS revenue to grow 12.8%, up from 10.3% in Q4, thanks to ongoing cloud migration and embedded AI capabilities boosting client productivity.”

In the options market, trading activity reflects heightened uncertainty surrounding the earnings release. Options analyst Michael Khouw noted last Wednesday that implied volatility suggests Oracle shares could move more than 10% by week’s end, aligning with the two-year average. Based on a closing price of $145, this implies a potential post-earnings breakout above $160 or a drop below $130.

To navigate this volatile environment, Khouw recommended a “strangle swap” options strategy: selling the September 25 expiry $125/$167.5 strangle (simultaneously selling a $125 put and a $167.5 call) while buying the January expiry $115/$195 wide strangle for a net debit of approximately $8.30. Based on current pricing, the probability of this strategy generating a profit is substantial.