Key Takeaways
- Oracle’s stock jumped ~36% after announcing a $300 billion partnership with OpenAI in September 2025, but has since fallen ~60% from that peak as doubts about OpenAI’s execution grew.
- The company has taken on roughly $130 billion of debt to fund AI‑related infrastructure, a large burden relative to its $43 billion book value.
- Despite the debt, Oracle’s earnings have risen 37% in fiscal 2026, pulling its trailing P/E ratio down from 76 to about 22—below the S&P 500 average—and its forward P/E is projected to reach the mid‑teens.
- Remaining performance obligations (RPO, or backlog) have grown from $455 billion to $638 billion since the OpenAI announcement, with roughly two‑thirds of that increase coming from non‑OpenAI deals, showing the business can diversify beyond the partnership.
- Analysts argue that the combination of a low valuation, strong profit growth, and a broadening backlog creates a scenario where Oracle’s stock could double by 2028, provided investors are comfortable with its leverage.
- The Motley Fool’s Stock Advisor service does not currently list Oracle among its top‑10 picks, noting its historical record of outsized returns from other selections.
Oracle (NYSE: ORCL) experienced a sharp rally after revealing a massive $300 billion agreement with OpenAI in September 2025. The news sent the stock up roughly 36 % in a single day, fueling optimism that the tech giant would capture a sizable share of the burgeoning AI infrastructure market. However, enthusiasm waned as investors began to question whether OpenAI could deliver on its side of the bargain, prompting a steady decline in Oracle’s share price.
By the end of fiscal 2026 (May 31 2026), Oracle had borrowed nearly $130 billion to build the data‑center and cloud capacity required to support the OpenAI collaboration. That debt load is substantial when measured against the company’s $43 billion book value, raising concerns about financial leverage. Consequently, the stock has slipped about 60 % from its post‑announcement high, eroding much of the early gain.
Despite the leverage, Oracle’s operating performance has improved. Fiscal 2026 net income rose 37 %, which, together with the falling share price, drove the trailing price‑to‑earnings (P/E) ratio down from a lofty 76 (seen right after the OpenAI deal) to roughly 22. This places Oracle’s valuation below the S&P 500 average P/E of around 32. Analysts expect profit growth to continue, projecting a forward P/E in the mid‑teens if the stock does not rebound soon. The lower multiples make the shares appear attractively priced, even after accounting for the sizable debt burden.
A critical indicator of Oracle’s underlying business strength is the growth in its remaining performance obligations (RPO)—the backlog of contracted future revenue. At the time of the OpenAI announcement, the partnership accounted for about two‑thirds of Oracle’s $455 billion RPO. Over the nine months that followed, the total backlog swelled to $638 billion. Importantly, a significant portion of that increase came from contracts unrelated to OpenAI, suggesting Oracle has been successful in winning additional AI‑ and cloud‑focused deals. In effect, the company has booked the equivalent of roughly 60 % of a new OpenAI‑scale agreement through other customers, which helps justify the massive capex ($56 billion in fiscal 2026) and the associated borrowing.
These dynamics lead some analysts to argue that Oracle’s stock is positioned for a potential double by 2028. The rationale hinges are two‑fold: first, the depressed valuation (trailing P/E ≈ 22, forward P/E trending toward the teens) offers a margin of safety; second, the expanding backlog demonstrates that Oracle’s AI infrastructure business is not solely dependent on the OpenAI deal. Even if the partnership underperforms, the company’s ability to secure sizable contracts elsewhere could sustain revenue growth and profit expansion. Investors willing to tolerate the leverage risk may therefore view the current price as an entry point for long‑term appreciation.
The article concludes with a caveat from The Motley Fool’s Stock Advisor team, which did not include Oracle in its latest list of ten top‑stock recommendations. The service highlights its historical success—picks such as Netflix (2004) and Nvidia (2005) have generated massive returns for early investors—and notes that its average total return of 931 % vastly outperforms the S&P 500’s 210 % over the same period. Readers are encouraged to review the full top‑10 list via Stock Advisor if they wish to compare Oracle against other high‑conviction ideas.
Finally, the disclosure notes that the author, Will Healy, holds no positions in the mentioned stocks, while The Motley Fool does hold Oracle shares and maintains a standard disclosure policy. The piece, titled “2 Reasons Oracle Stock Could Double in Value by 2028,” was originally published by The Motley Fool.