Quick overview

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Oracle Corporation (NYSE: ORCL) has faced downward pressure since reaching a peak of $327.76 on September 10. The stock has dropped by more than 20% from that peak, impacting its strong gains this year

Oracle’s recent decline in stock value reflects broader market concerns regarding the high valuations of AI-related companies, as its forward price-to-earnings (P/E) ratio exceeds 33. The company projects revenues of $166 billion from cloud infrastructure and $20 billion. Investors adopted a “sell the news” mentality, raising questions about the sustainability of these forecasts.

Oracle’s fundamentals remain solid. The company experienced  52% growth in cloud infrastructure and has $455 billion in remaining performance obligations (RPO), largely due to its partnership with OpenAI. Currently, the stock is trading at 13.9 times projected earnings for the end of this decade, leading some investors to view the decline as a potential buying opportunity.

Analysts predict an average stock price of $253 for November 2025, with a possible low of $212 if enthusiasm for AI diminishes. The stock’s price-to-free cash flow (P/FCF) ratio of 15.44 suggests it may be undervalued compared to historical averages. Overall, the recent drop indicates that investors are reassessing the profit growth expectations to justify current valuations.

Oracle has significantly benefited from the surge in AI infrastructure. The company recently announced a five-year deal worth over $300 billion with OpenAI for access to AI chips. After reporting $455 billion in remaining performance obligations—a 359% increase from the previous year—Oracle’s stock enjoyed its best day since 1992 following its September earnings report. Additionally, Oracle confirmed a cloud agreement with Meta and disclosed a commitment of $65 billion in cloud infrastructure during the current quarter.

 

Furthermore, Oracle indicated that its adjusted gross margins on AI infrastructure would be between 30% and 40%, surpassing the projections of some analysts.