Why Isn’t Oracle (ORCL) Stock Participating in Tech Rally?

Oracle (ORCL) had been one of the biggest winners of the AI investment cycle over the past couple of years, but the stock has sold off sharply over the last nine months, down 57% from its all-time highs in September 2025. 

After Oracle stock fell 35% in June, it appears to be oversold on a technical level. The Relative Strength Index (RSI) indicator sits near 29 as of the June 30 closing price. Anything below the 30 level is considered oversold on a technical basis. 

The recent weakness, however, is not necessarily driven by deteriorating fundamentals. Instead, investors appear to be grappling with valuation concerns, profit-taking pressure after a huge rally, and questions about whether Oracle can execute on its aggressive data center expansion plans. The stock hit an all-time high of $345 on September 10, 2025, after reporting explosive growth on earnings and a spike in its remaining performance obligations. The stock rallied over 20% that day after Oracle reported a 359% rise in Total Remaining Performance Obligations (RPO) to $455B. The RPOs, which are future contracted revenue, reached an eye-popping $638 billion last quarter, buoyed by a multi-year deal with OpenAI and data center initiatives like the Stargate facility. 

So, what gives?

Oracle stock saw a late Spring rebound, but investors have become more sensitive to any signs of slowing growth or delays in AI-related deployments. Once a highly cash-generative tech business, Oracle has transitioned into an aggressive data-center builder, which has highlighted several distinct challenges investors are watching. To fund its AI build-out, Oracle capital expenditures rose over 160% to nearly $56 billion for the 2026 fiscal year. This in turn has increased its long-term debt, which has swollen to roughly $130 billion, raising credit and balance sheet risk. The sheer scale of data center operations and current lower-margin AI offerings have compressed gross margins, driving down free cash flow in the near term.  Shares may reflect the length of time it will take Oracle to monetize its enormous paper backlog into actual earnings.  

Besides the massive RPO backlog, Oracle has continued to report solid growth. The Oracle Cloud infrastructure (OCI) segment surged 93% year-over-year in the latest quarter, making up a larger piece of the company's $19.18 billion total quarterly revenue. Total Cloud Revenue increased 47% to $9.9 billion. Growth drivers also include AI training and inference workloads, large enterprise cloud migrations and partnerships with major AI companies and hyperscale customers. Oracle management has repeatedly highlighted that AI demand is exceeding available capacity, prompting aggressive data center expansion globally. This has not helped the stock performance recently.  

The path forward for Oracle and investors presents a clear trade-off between long-term growth and current execution risk. If the company can successfully turn its massive, contracted AI pipeline into highly profitable revenue over the next few years, the current sell-off could prove to be an attractive entry point. However, until the company can get its data center locations up and running and monetize this into growth and positive free cash flow, the stock may continue to experience headwinds. The company remains one of the clearest beneficiaries of the AI infrastructure buildout, but investors continue to be wary of execution risk. 

This material is intended for informational purposes only and should not be considered a personalized recommendation or investment advice. Investors should review investment strategies for their own particular situations before making any decisions.

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