Oracle Stock Crashes to a 52-Week Low. Here's Why It Might Be Time to Buy.

Oracle (ORCL) shares have plunged roughly 62% from their all-time high and are now trading around a new 52-week low of $128.42. The sharp selloff reflects growing investor concerns over the company's aggressive AI infrastructure spending, rising debt, potential shareholder dilution, and its dependence on a handful of major AI customers, primarily OpenAI.

The biggest concern is Oracle's spending plans. The company expects capital expenditures to surge in fiscal 2027 as it expands its cloud infrastructure to meet booming AI demand. To help finance those investments, Oracle plans to raise $40 billion through a combination of debt and equity, fueling worries about higher leverage and dilution.

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Adding to the concerns, Oracle's short-term margins are likely to remain under pressure due to the planned expenditure to support growth.

These concerns are valid and help explain the recent weakness in ORCL stock. Let's delve deeper.

Oracle's record $638 billion in remaining performance obligations (RPO) provides exceptional visibility into future revenue. However, concerns around the company's rising debt and dilution fears to fund the growth plan have weighed on ORCL stock.

The concern is understandable. However, Oracle has taken steps to reduce the burden on its balance sheet. During the latest quarter, Oracle signed $67 billion in AI infrastructure contracts, with the majority structured as either bring-your-own-hardware or prepaid agreements. As a result, Oracle's total portfolio of bring-your-own-hardware and prepaid AI contracts has reached $75 billion, while maintaining margins comparable to its traditional cloud business.

These contract structures significantly reduce Oracle's capital requirements. Instead of funding every GPU deployment itself, Oracle can either purchase hardware backed by customer commitments or allow customers to supply the GPUs directly. That lowers upfront investment, limits balance-sheet pressure, and enables Oracle to expand AI capacity without bearing the full cost of infrastructure.

While OpenAI remains the largest contributor to Oracle's massive RPO, the company is reducing customer concentration risk by expanding its AI cloud customer base.

In the latest quarter, Oracle revealed that four large customers each signed contracts worth more than $8 billion, highlighting growing demand from multiple enterprise-scale AI clients.

The company's multi-tenant cloud infrastructure also provides significant flexibility in allocating GPU capacity among customers. During Q4, approximately 35,000 GPUs across 59 customer contracts came up for renewal. Nearly 49% of those customers renewed, representing 92% of the GPUs under those contracts.

Importantly, the remaining GPUs were sold to other customers within the same quarter, helping maintain an impressive 97.5% global GPU utilization rate.

Overall, while OpenAI accounts for almost half of its RPO, Oracle's AI business is becoming increasingly diversified. Further, the demand for AI infrastructure remains exceptionally strong, supporting ORCL's investment case.

Oracle's gross margins could face temporary headwinds in fiscal 2027 as it continues investing heavily in new data centers and cloud infrastructure. However, management expects those pressures to ease as newly built facilities reach full contractual revenue capacity, allowing infrastructure margins to recover.

Oracle also expects operating expenses to decline slightly year over year in dollar terms, reflecting ongoing efficiency initiatives. Combined with accelerating revenue growth, those cost controls should improve operating leverage and support stronger earnings.

Looking ahead, Oracle projects first-quarter adjusted earnings per share (EPS) of $1.72 to $1.76, representing 17% to 20% year-over-year growth. The company also expects revenue and earnings growth to accelerate in the second half of the fiscal year as additional data center capacity comes online, enabling it to meet rising customer demand for cloud and AI services. Further, Oracle reaffirmed its long-term growth forecast and expects its top and bottom lines to grow at a CAGR of 31% and 28%, respectively, through the end of this decade.