A recent “Sell” recommendation from investment bank Rothschild & Redburn has triggered a sharp sell-off in Oracle shares, casting doubt on the software giant’s standing as a primary beneficiary of the artificial intelligence boom. The stock fell approximately 5% following the report, which argued that the revenue potential from Oracle’s cloud business has been “significantly overestimated.” This decline extends a downward trend that has pulled the share price around 16% below its recent peak.
Spectacular Bookings Mask Underlying Concerns
The bearish assessment presents a stark contrast to the investor enthusiasm that surrounded Oracle just weeks ago. In early September, the company reported first-quarter results for its 2026 fiscal year that featured a staggering 359% surge in remaining performance obligations, which climbed to $455 billion. This massive backlog was largely attributed to multi-billion dollar AI contracts with industry leaders, including OpenAI.
However, a closer look at the actual financial results reveals a disconnect between these future promises and current profitability. Key figures from the report include:
* Total Revenue: Increased by 12% to $14.9 billion.
* Cloud Revenue: Grew 28% to $7.2 billion.
* Cloud Infrastructure (Core AI Business): Jumped 55%.
* Earnings Per Share: Decreased by 2% to $1.01.
Should investors sell immediately? Or is it worth buying Oracle?
Strategic Moves and Fundamental Doubts
Amid the stock’s weakness, news emerged of a potential strategic coup: Oracle, alongside partners, is reportedly poised to acquire a 50% stake in TikTok’s US operations. This move would place the company at the center of the restructuring of one of the world’s most popular social media platforms.
Nevertheless, market experts question whether this deal is enough to alleviate fundamental concerns about Oracle’s business model. The central issue for investors remains timing: when will the billions of dollars in AI-related bookings finally translate into substantial bottom-line growth? While the cloud infrastructure division is expanding rapidly, its performance has not yet been sufficient to offset softer results in other segments of the business. The initial AI euphoria is now being tested by the market’s demand for tangible financial returns.
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