Oracle is set to report earnings next week, a pivotal moment for both the company and the broader AI sector, especially following the OpenAI Foundation's presentation at the Goldman Sachs Communications & Technology conference [1]. Wall Street sentiment is highly optimistic, with 42 Buy ratings, eight Holds, and just one Sell on Oracle shares [1]. Analysts expect approximately 28% constant-currency revenue growth for Oracle, a significant acceleration from the 11% growth recorded a year ago, while adjusted EPS is projected to rise by about 18.5% [1]. Notably, Oracle's revenues are outpacing earnings growth, a contrast to hardware suppliers like Micron, whose revenues are expected to increase 246% and EPS by over 840% for the fiscal year ending August 31, 2026 [1].
The bull case for Oracle centers on its cloud infrastructure (OCI) business, which has been experiencing explosive growth. Management is guiding for 27%-29% overall revenue growth this quarter [1]. Unlike Amazon, Alphabet, and Meta, which are reinvesting all or more of their cash flow into AI infrastructure, Oracle is more leveraged and relies more heavily on external financing relative to its anticipated spending [1]. Bulls see this as an opportunity for greater financial and operating leverage to benefit from an AI boom, but the company's higher leverage also introduces risk, especially given formidable competition [1].
The options market reflects this uncertainty, with implied volatility suggesting a move greater than 10% in Oracle's share price by the end of next week, consistent with the average over the past two years [1]. A suggested options strategy involves a 'double diagonal' or 'strangle swap,' selling the September 25th weekly 125/167.50 strangle and buying the January 115/195 strangle for a net debit of about $8.30. This position has an estimated probability of profit above 70%, with breakeven points at approximately $118 and $180, representing potential moves of 17%-18% in either direction [1].
Overall, the coming week is seen as potentially pivotal for Oracle, with significant market moves anticipated depending on the company's earnings and its role in the ongoing AI infrastructure buildout [1].
CONCLUSION
Oracle's upcoming earnings are highly anticipated, with Wall Street expecting strong growth and the options market pricing in significant volatility. The company's leveraged position in the AI infrastructure race could amplify both upside and downside risks, making next week a crucial test for Oracle and the broader AI trade.