• Home
  • Latest
  • Fortune 500
  • Finance
  • Tech
  • Leadership
  • Lifestyle
  • Rankings
  • Multimedia
Big TechMarkets

Oracle earnings may not be enough to assuage debt, AI deal fears

By
Carmen Reinicke
Carmen Reinicke
and
Bloomberg
Bloomberg
Down Arrow Button Icon
By
Carmen Reinicke
Carmen Reinicke
and
Bloomberg
Bloomberg
Down Arrow Button Icon
December 10, 2025, 4:19 PM ET
Larry Ellison
Larry Ellison, co-founder and executive chairman of Oracle Corp., during an executive order signing ceremony in the Oval Office of the White House in Washington, DC, US, on Monday, Feb. 3, 2025. Chris Kleponis/CNP/Bloomberg via Getty Images

Three months ago, Oracle Corp.’s scorching earnings outlook sent the shares soaring to their best day in three decades. But a quarter later, things look very different for the database software maker and the AI trade in general.   

Recommended Video

Shares of Oracle, which reports earnings after the close, have plunged 33% since Sept. 10, when they hit an all-time high based on enthusiasm for raging growth in its cloud business. Today, Oracle and many other artificial intelligence companies are facing a wave of skepticism due to heavy capital expenditures and the circular nature of some arrangements.

“They are stretching their balance sheet about as far as they can, their free cash flow is negative and their balance sheet is highly levered,” said Jed Ellerbroek, portfolio manager at Argent Capital Management, which owns Oracle shares. “Their neck is sticking out.”

Oracle’s debt risk is particularly troubling to investors. The company has sold tens of billions of dollars of bonds in recent months through note sales in its name and indirectly through projects it’s backing. Last week, the cost of protecting Oracle’s debt against default reached its highest level since March 2009. Analysts following the company say this uncertainty dwarfs whatever good news it reports in its quarterly earnings.  

“It won’t matter as much as the overarching story of customer concentration, how are they financing all this?” Gabelli Funds analyst Ryuta Makino said. “They’re going to be free cash flow negative for the next couple of years during the data center build out. So there’s a lot of question marks surrounding that.”

Oracle declined to comment. Shares were little changed after falling 1.2% in early trading Wednesday.

Wall Street expects the Austin-based company’s backlog to grow in its fiscal second quarter, which ended in November. Remaining performance obligations, the figure that sparked the late-September rally, are projected to be about $520 billion, a more than 400% jump from a year earlier, and keep rising in the following quarter, according to data compiled by Bloomberg. 

Perception Problem

“It’s not about the growth rate as much as it is the perception of how they’re getting there,” said Michael Sansoterra, chief investment officer at Silvant Capital Management, which owns Oracle in its portfolios. “I don’t know that earnings will change the picture. I suspect the quarter will be good, and I suspect the guidance will be good.” 

Analysts estimate that Oracle will post an 11% jump in adjusted earnings per share from the same quarter a year ago on a 15% rise in revenue, according to data compiled by Bloomberg. The company’s gross margin is expected to be nearly 69%, down from 71% a year earlier. The big change is seen in its capital expenditures, which are projected to be $8.2 billion compared with less than $4 billion a year ago, and its free cash flow, which is estimated at negative $5.9 billion, up from $2.7 billion a year earlier.

On the earnings call, Oracle executives will almost certainly get questions about OpenAI, which signed a massive deal with Oracle for cloud-computing services in September. Investors are keen on diversity of Oracle’s expected revenue sources and any significant new customers signed during the quarter will likely be cheered. 

“I always thought it was dangerous for the company to take on significant leverage while tying its future to a startup. Now that OpenAI is under siege, the risk has elevated even further,” said Michael O’Rourke, chief market strategist at Jonestrading. “It will be imperative for management to present a contingency plan if OpenAI is slow or unable to execute.”

Regardless of how the results come in, options traders are expecting Oracle’s stock to move on the report, pricing in a 10% bounce in either direction following its earnings. The stock has been rebounding recently and is up almost 10% in December. 

In terms of valuation, the shares are relatively expensive, trading at roughly 30 times estimated earnings over the next 12 months, far higher than their 10-year average of 17 and above the Nasdaq 100 Index’s 26 multiple. 

All of which has some investors hesitant about buying Oracle right now. Sansoterra at Silvant Capital, for one, says he’s in a holding pattern. 

“If we saw margin improvement or margin trajectory that was not just talk but actual execution, we’d be more interested,” he said. “But we haven’t seen that yet. And we don’t do the hope trade.” 

Cisco Systems Inc. shares have rallied about 34% this year as the stock inches closer to its all-time high set in 2000. Investors have waited more than 25 years for this moment, with the stock trading at levels last seen during the peak of the dot-com era. 

Join us at the Fortune Workplace Innovation Summit May 19–20, 2026, in Atlanta. The next era of workplace innovation is here—and the old playbook is being rewritten. At this exclusive, high-energy event, the world’s most innovative leaders will convene to explore how AI, humanity, and strategy converge to redefine, again, the future of work. Register now.
About the Authors
By Carmen Reinicke
See full bioRight Arrow Button Icon
By Bloomberg
See full bioRight Arrow Button Icon

Latest in Big Tech

Musk
Big TechElon Musk
Elon Musk admits DOGE was only ‘somewhat successful’ and he should have ‘worked on my companies’ instead
By Bill Barrow and The Associated PressDecember 11, 2025
1 hour ago
Sundar
CybersecurityAntitrust
Google illegally scraped the web to fix its AI problems and catch up to OpenAI, European regulators probe
By Kelvin Chan and The Associated PressDecember 11, 2025
1 hour ago
Warren
Big TechAntitrust
Warner Bros. merger fight draws fire across U.S. political divide
By Hannah Miller and BloombergDecember 11, 2025
1 hour ago
Trump
Big TechAntitrust
Trump says Warner Bros. deal should include sale of CNN
By Christopher Palmeri and BloombergDecember 11, 2025
1 hour ago
netflix
Big TechNetflix
Netflix looks to become Debtflix again to fund Warner Bros. acquisition
By Emily Graffeo and BloombergDecember 11, 2025
2 hours ago
NewslettersTerm Sheet
Cursor has growing revenue and a $29 billion valuation—but CEO Michael Truell isn’t thinking about an IPO
By Beatrice NolanDecember 11, 2025
2 hours ago

Most Popular

placeholder alt text
Success
At 18, doctors gave him three hours to live. He played video games from his hospital bed—and now, he’s built a $10 million-a-year video game studio
By Preston ForeDecember 10, 2025
1 day ago
placeholder alt text
Politics
Exclusive: U.S. businesses are getting throttled by the drop in tourism from Canada: ‘I can count the number of Canadian visitors on one hand’
By Dave SmithDecember 10, 2025
1 day ago
placeholder alt text
Economy
‘Be careful what you wish for’: Top economist warns any additional interest rate cuts after today would signal the economy is slipping into danger
By Eva RoytburgDecember 10, 2025
20 hours ago
placeholder alt text
Economy
‘Fodder for a recession’: Top economist Mark Zandi warns about so many Americans ‘already living on the financial edge’ in a K-shaped economy 
By Eva RoytburgDecember 9, 2025
2 days ago
placeholder alt text
Uncategorized
Transforming customer support through intelligent AI operations
By Lauren ChomiukNovember 26, 2025
15 days ago
placeholder alt text
Success
Netflix–Paramount bidding wars are pushing Warner Bros CEO David Zaslav toward billionaire status—he has one rule for success: ‘Never be outworked’
By Preston ForeDecember 10, 2025
22 hours ago
Rankings
  • 100 Best Companies
  • Fortune 500
  • Global 500
  • Fortune 500 Europe
  • Most Powerful Women
  • Future 50
  • World’s Most Admired Companies
  • See All Rankings
Sections
  • Finance
  • Leadership
  • Success
  • Tech
  • Asia
  • Europe
  • Environment
  • Fortune Crypto
  • Health
  • Retail
  • Lifestyle
  • Politics
  • Newsletters
  • Magazine
  • Features
  • Commentary
  • Mpw
  • CEO Initiative
  • Conferences
  • Personal Finance
  • Education
Customer Support
  • Frequently Asked Questions
  • Customer Service Portal
  • Privacy Policy
  • Terms Of Use
  • Single Issues For Purchase
  • International Print
Commercial Services
  • Advertising
  • Fortune Brand Studio
  • Fortune Analytics
  • Fortune Conferences
  • Business Development
About Us
  • About Us
  • Editorial Calendar
  • Press Center
  • Work At Fortune
  • Diversity And Inclusion
  • Terms And Conditions
  • Site Map

© 2025 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell/Share My Personal Information
FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.