Oracle (ORCL) Earnings Preview: CapEx & Debt in Focus

Oracle (ORCL) releases earnings after the bell, and while a lot of market focus is on the Fed’s rate cut decision and Powell’s press conference after, the report could give key insight into AI and the results of the capex spending fueling U.S. GDP.

Zacks estimates it will report EPS of $1.63 (+11% year-over-year) and revenue of $16.15 billion (+15%). However, investors will also be closely watching guidance and free cash flow, as well as remaining performance obligations. 

Oracle has gone all-in on OpenAI, investing heavily in data centers, and raised a whopping $18 billion in a September bond sale to support its work. It may not be done: a Citi analyst estimates it will continue raising $20-$30 billion every year over the next three years. Credit default swaps have risen to records as investors look to hedge this enormous debt.

As far as the promised returns: in September, the Wall Street Journal reported that Oracle had made a $300 billion dollar deal with OpenAI for the latter to buy computing power over 5 years. Importantly, that deal doesn’t begin until 2027.

Also in September, after announcing its remaining performance obligations hit $455 billion – an over 350% growth – the stock saw a gap up. It has since fallen farther than the jump point, collapsing 23% in October alone, its worst month since 2001.

Investors may be concerned that Oracle is putting all its eggs into the OpenAI basket. While it has some other large deals, including a $20 billion Meta Platforms (META) contract, this may not be enough to satisfy Street worries.

Some market observers have been calling for 2026 to be the year of AI ROI, where the patience for capex spending will start to run out, and the tech sector will shake out the winners and losers. Keep in mind that OpenAI recently declared a “Code Red” as competitors like Alphabet (GOOGL) and privately-held Anthropic close in. Also keep in mind the web of circular spending within the tech sector on AI as the companies become more and more intertwined.

Despite the fall, Oracle is still up 33% year-to-date and 15.5% year-over-year. The options market implies a +/- $20 move, or around a 9% swing. Join Schwab Network live for earnings coverage and more.

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