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• Research suggests Oracle's strong cloud growth in AI is impressive, but high valuations and margin pressures led to analyst downgrades, highlighting potential risks for long-term holders.
• It seems likely that despite massive future obligations worth $455 billion, the company's heavy spending on infrastructure could strain profits, sparking debates on sustainability.
• Evidence leans toward a cautious approach for investors, as similar cases like John Deere show how earnings beats can still trigger sell-offs if prices get too stretched.

Have you ever watched a stock skyrocket after good news, only for experts to turn sour days later? That's exactly what happened with Oracle after its first-quarter earnings for fiscal year 2026. The tech giant, known for its databases and cloud services, reported results on 9 September 2025, sending shares up over 30% at first.

But then, analysts on platforms like Seeking Alpha started downgrading their views, shifting from bullish to more neutral or even bearish.

This twist has left many investors scratching their heads. In this post, we'll break it down simply – like explaining to a 10-year-old why a toy looks shiny but might break easily. We'll look at what went right, what worried the pros, and tips for you if you're thinking about Oracle stock.

Understanding Oracle's Earnings: The Good News First

Oracle, a big company that helps businesses store and manage data, shared its latest financial report for the period ending August 2025.

Think of it like a report card – some grades were great, others just okay.

Key Financial Highlights

Let's start with the positives. Oracle made $14.9 billion in total sales, which is 12% more than last year.

That's like selling more lemonade than before at your stand. The star was their cloud business – that's where companies rent computer space online instead of buying their own. Cloud sales jumped 28% to $7.2 billion. Even better, the infrastructure part (fancy servers for heavy work) grew 55% to $3.3 billion. But earnings per share – how much profit per share of the company – were a mixed bag. The adjusted one was $1.47, up 6% from last year, but it missed what experts expected by a penny. The basic one dropped 2% to $1.01.

The Big Buzz: AI and Future Promises

Oracle is betting big on artificial intelligence, or AI – that's computers that think like humans for tasks like chatting or predicting the weather. They signed huge deals, leading to $455 billion in future work promised, up a whopping 359% from last year.

Imagine promising to mow 455 billion lawns – that's a lot of future money!

Bosses like CEO Safra Catz said their cloud for AI is growing fast, expecting 77% more sales this year to $18 billion, and even bigger jumps later.

They're building more data centres with partners like Nvidia for super-fast chips.

This excited Wall Street at first, pushing the stock up sharply.

For more on how AI is changing tech stocks, check our internal guide: Top AI Stocks to Watch in 2025.

Why Analysts Turned Less Bullish: The Concerns Explained

Even with all that good stuff, experts on Seeking Alpha – a site where smart investors share opinions – lost their positive view on Oracle.

It had a "Buy" rating for over eight months, but after earnings, it dropped.

Why? Let's unpack it like opening a puzzle box.

Overvaluation: Is the Price Too High?

One big worry is the stock's price. Oracle's shares trade at 75 times its earnings – way above the usual 31 times over five years.

That's like paying £75 for a £1 chocolate bar because you think it'll taste amazing later. Analysts like The Value Portfolio downgraded to "Strong Sell," saying success made it too expensive. Another said, "Oracle's success makes it overvalued," pointing to stagnant profits per share and falling margins.

Margins are like how much pocket money you keep after buying supplies – they're shrinking because of big spending.

Heavy Spending and Debt Risks

To grow its AI cloud, Oracle is spending loads on new buildings and tech. Their capital spending now tops net income, which is risky.

Debt is rising, too.

It's like borrowing to build a huge treehouse, hoping lots of friends pay to visit.

They rely on Nvidia chips, while rivals make their own, which could hurt costs later.

One analyst asked if the AI rally is "make-believe" because growth might not last.

Stock Reaction: Surge Then Slump

Shares jumped 30% right after, adding billions in value.

But by 11 September, they fell 6% as doubts grew. Overall, up 25% in a week, but analysts say don't rush in.

Learn how to spot these patterns in our post: How to Analyse Earnings Reports Like a Pro.

A Similar Story: The John Deere Example

This isn't unique to Oracle. Take John Deere, the tractor maker. In August 2025, they beat earnings expectations for their third quarter, with better-than-expected profits despite tough farm markets.

Sales dropped, but they narrowed their full-year outlook to $4.75-5.25 billion in net income. Analysts on Seeking Alpha kept a "Hold" rating, saying the stock is too pricey despite good execution. Net income fell sharply year-over-year, down 50% then 24% in prior quarters. Cyclical issues like low farm income and tariffs hurt, much like Oracle's spending pressure. Deere's price-to-earnings is stretched, and one analyst warned a single miss could "crash the party."

Just like Oracle, strong parts hid bigger worries, leading to cautious views. This shows how even wins can lead to downgrades if the price doesn't match reality.

For more comparisons, see our article: Cyclical Stocks in 2025: Lessons from Industrials.

What This Means for Investors: Practical Tips

So, should you buy, sell, or hold Oracle? It depends on your goals. If you're in for long-term AI growth, the $455 billion backlog is promising.

But if you hate risks, the high price and spending might scare you.

Tips for Navigating Downgrades

• Check Valuations Yourself: Use tools like price-to-earnings ratios. If it's way above average, think twice. For Oracle, compare to peers like Microsoft (around 35x) or Amazon's AWS.
• Look at Long-Term Trends: Oracle's shift to cloud started years ago. In 2020, cloud was small; now it's half their business. But watch if AI hype fades.
• Diversify: Don't put all eggs in one basket. Mix with stable stocks or funds.
• Monitor News: Follow sites like Seeking Alpha for updates. External source: Seeking Alpha Oracle Page.

Another tip: Read official reports. Check Oracle's investor site for full details:

Potential Opportunities and Risks

Opportunities: If Oracle hits its 77% cloud growth, shares could climb more.

Risks: If spending eats profits or AI slows down, downgrades could worsen.

Table: Oracle vs. Peers Q1 2025/26 Growth

This table shows that Oracle's growth is competitive, but its valuation stands out.

Broader Context: Tech Sector Trends in 2025

Oracle's story fits bigger tech shifts. AI is hot, with companies like Nvidia up hugely. But after hype, reality checks come – like margins squeezed competition.

In 2025, cloud spending is expected to hit $1 trillion globally, per Gartner. Oracle grabs share with enterprise focus, unlike consumer-heavy rivals.

But controversies: Some say AI growth is overblown, with energy costs rising for data centres. Oracle plans nuclear power for some, which is innovative but risky.

For balanced views, external source: CNBC Oracle Coverage.

Oracle's Q1 earnings showed strong AI-driven growth, but analyst downgrades highlight overvaluation and spending risks, much like Deere's case.

If you're an investor, weigh the massive $455 billion future work against current high prices.

Stay informed, diversify, and perhaps wait for a dip. Ready to dive deeper? Sign up for our newsletter for weekly stock tips, or comment below: What's your take on Oracle?

Key Citations:

• Oracle Announces Fiscal Year 2026 First Quarter Financial Results

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