To The Moon

Oracle Earnings Preview: What Will Mark Oracle's Comeback Moment?

$Oracle(ORCL)$   is scheduled to release its fiscal Q2 2026 results after the market close on December 10 (ET).

Traders are effectively betting that this Q2 report—centered on RPO quality, OCI acceleration, and debt sustainability—could be a pivotal moment in deciding whether Oracle’s AI “counterattack” narrative regains credibility or the credit-market doubts deepen.

Earnings Forecast

For fiscal Q2 2026 (quarter ending November 30, 2025), analysts expect Oracle to deliver:

– Revenue: about $16.19 billion, up roughly 15.2% year over year.

– GAAP EPS: about $1.17, up roughly 6.3% year over year.

– Non-GAAP (adjusted) EPS: about $1.64, implying growth of around 11%.

Three Things to Watch

1. RPO Growth and Mix: The Single Most Important Metric

RPO is the key leading indicator of future revenue, and its unprecedented spike has become the cornerstone of the Oracle bull case.

In FY26 Q1, Oracle disclosed total RPO of $455 billion, up 359% year over year, a level far above any traditional cloud vendor.

Media and sell-side reports attribute most of this jump to the five-year, $300 billion OpenAI compute-purchase agreement, closely tied to the 4.5–7 GW Stargate data-center program.

This concentration, however, creates a clear counterparty-risk narrative: too much backlog tied to a single, venture-backed AI customer.

According to Bloomberg-compiled estimates, the market is looking for Q2 RPO somewhere around $520 billion, implying an increase of more than $60 billion versus Q1. A material beat on that RPO figure would be a strong positive signal, reinforcing the view that AI infrastructure demand is both broad-based and durable rather than a one-off spike.

Moreover, higher contribution from non-OpenAI customers would boost investor confidence in the quality and durability of the backlog.

Any incremental disclosure around the OpenAI contract mechanics in Q2—timing and ramp of capacity, prepayments, take-or-pay clauses, and cancellation protections—would also be interpreted positively.

2. OCI as the Growth Engine: Path and Pace to $144 Billion

Oracle's business is increasingly split into two large buckets:

– A cloud segment (applications + infrastructure), and

– A more mature software segment, where quarterly revenue has plateaued around $6 billion and is expected to be largely ex-growth.

Within cloud, application (SaaS) offerings like Fusion and NetSuite are still growing steadily, but the real incremental growth driver is infrastructure (IaaS), i.e., Oracle Cloud Infrastructure (OCI).

For Q2 FY26, consensus expects OCI revenue of roughly $4.08 billion, implying about 67% year-over-year growth.

More importantly, management has already outlined a multi-year OCI roadmap, projecting OCI revenue to reach $144 billion by FY2030, with growth peaking around FY28.

In this context, investors will be watching for:

– Q2 OCI growth: Is YoY growth merely in line with the ~67% expectation, or does it re-accelerate?

– Updated OCI guidance: Any upward revision to the OCI ramp—whether explicitly in numbers or implicitly via commentary on capacity, bookings, or utilization—would be a major positive.

The logic is simple: faster OCI growth helps justify the aggressive capex and balance-sheet expansion, since the massive RPO must eventually convert to high-margin cloud revenue.

3. Balance Sheet and Funding: Proving Financial Resilience

In 2025, Oracle tapped the bond market several times, driving long-term debt sharply higher and pushing its debt-to-equity ratio above 4x.

Five-year CDS spreads on Oracle have recently traded around 120bps, their highest levels since the global financial crisis, as investors rush to buy protection against an AI-driven debt misstep.

Against that backdrop, Q2 needs to offer more clarity on three fronts:

– Leverage targets: Where does management intend to cap net debt and debt-to-equity as it builds out AI infrastructure?

– Funding plan: How much of the capex ramp will be funded through incremental debt vs. internal cash generation over the next 3–5 years?

– Interest burden and coverage: Currently, quarterly interest expense sits around $1 billion, and sell-side models expect this to rise toward $2 billion per quarter as recent and future bond issues fully flow through the P&L. If AI demand and OCI revenue track the bullish scenarios, this leverage can be digested; if competitive or macro factors cause revenue to fall short, free-cash-flow pressure could become a serious overhang.

Option Playbook

Heading into Oracle's earnings this Wednesday, the derivatives market is signaling elevated anticipation:

– Implied volatility: about 63.14%, sitting near the 93rd percentile of its historical range.

– Implied move: options are pricing roughly a ±10% move on the earnings print. Historically, Oracle's shares have finished higher in 5 of the past 9 earnings reactions.

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