Why Oracle Stock May Drop Soon
Oracle (ORCL) has stumbled before. Its stock plunged more than 30% within a span of less than 2 months in 2025, wiping out billions in market value, and erasing massive gains in a single correction. If history is any guide, ORCL stock isn’t immune to sudden, sharp declines.
Oracle’s shares have plunged over 40% since September’s peak, unwinding summer’s AI euphoria amidst concerns over its aggressive capital expenditure and mounting debt, with credit default swaps signaling heightened risk. A $300 billion OpenAI contract, while transformative, exposes significant client concentration, and cloud margins trail rivals by dozens of percentage points. This dramatic reversal highlights how rapid growth, fueled by substantial borrowing, can quickly morph into a potent vulnerability.
What Could Send The Stock Crashing?
- AI Investment Risk: Oracle’s $300B OpenAI deal faces “reverse Midas effect” scrutiny and significant capital spending, projected to reach $35B in FY26, risking financial strain and negative free cash flow.
- Cloud Market Lag: OCI’s 3% cloud market share (Q3 2025) trails rivals (AWS 29%, Azure 20%, Google 13%), risking sustained dominance by hyperscalers despite OCI’s high growth.
- Cerner Drag: Oracle Health (Cerner) sales are forecast to decline/flatline in FY25/26, with billions in acquisition debt and persistent client satisfaction issues, hindering healthcare market growth.
What’s The Worst That Could Happen?
When looking at risk for Oracle, it’s clear that even strong companies can take a hit in market downturns. During the Dot-Com Bubble, ORCL fell about 77%, which is huge. The Global Financial Crisis pushed it down around 41%, and the Inflation Shock caused a similar 40% drop. Even smaller sell-offs like the 2018 Correction and the Covid Pandemic triggered declines close to 19% and 29%, respectively. Solid fundamentals matter, but when the market turns, Orcale’s history shows it’s not immune to steep losses.
Is Risk Showing Up In The Company’s Financials Yet?
Let’s take a look at fundamentals
- Revenue Growth: 9.7% LTM and 10.2% last 3-year average.
- Cash Generation: Nearly -10.0% free cash flow margin and 31.6% operating margin LTM.
- Valuation: Oracle stock trades at a P/E multiple of 45.1
| ORCL | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| PE Ratio | 45.1 | 23.0 |
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| LTM* Revenue Growth | 9.7% | 6.1% |
| 3Y Average Annual Revenue Growth | 10.2% | 5.4% |
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| LTM* Operating Margin | 31.6% | 18.8% |
| 3Y Average Operating Margin | 30.3% | 18.2% |
| LTM* Free Cash Flow Margin | -10.0% | 13.5% |
*LTM: Last Twelve Months
If you want more details, read Buy or Sell ORCL Stock.
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