Options data reveals how Oracle stock may respond to its Q4 earnings tomorrow

Oracle ORCL shares remain in focus ahead of the artificial intelligence (AI) infrastructure firm’s Q4 earnings set to be released tomorrow, June 10, after market close. 

Consensus is for the company to report $1.96 a share (EPS) of adjusted earnings on US$19.1 billion (approx. $24.6 billion) in revenue – about a 20% growth on the top-line and 15% on the bottom-line.

Heading into the quarterly print, Oracle stock stands as a major “outperformer”, currently up nearly 50% versus its recent low of about $137.

Where options data suggests Oracle stock is headed

As is evident, the Austin-headquartered firm has already had a meteoric run in recent months, but the derivatives market believes it’s not out of room just yet. 

The put-to-call ratio on contracts expiring June 12 (a day after earnings) sits at 0.46 at the time of writing, signaling a strong bullish skew.

And the upper price on those contracts is set at about $224 currently, indicating ORCL shares could be trading more than 10% above current levels after the quarterly release.

Note that technicals also favour continued momentum ahead; Oracle remains firmly above its key moving averages (MAs), with an RSI in the early 50s suggesting room for further upside before it hits “overbought” levels.

Why ORCL shares are somewhat risky to own

Bulls will point to Oracle's US$553 billion (approx. $713.5 billion) remaining performance obligations (RPO) backlog – but skeptics are watching something far more unsettling: the balance sheet.

The behemoth's long-term debt has pushed above US$124 billion (approx. $160 billion), interest expense has climbed 32% year-over-year, and trailing free cash flow sits at a deeply negative US$24.7 billion (approx. $31.9 billion).

To fund its US$50 billion (approx. $64.5 billion) capex program, up from just US$12.1 billion (approx. $15.6 billion) in the "comparable" nine-month period last year, Oracle announced plans to raise as much as US$50 billion (approx. $64.5 billion) in February via bonds and convertible preferred stock.

The company has also disclosed US$261 billion (approx. $336.7 billion) in additional data center lease commitments not yet reflected on the balance sheet.

Naturally, the current ratio has deteriorated sharply, falling to 0.62, meaning short-term liabilities now significantly outpace current assets.

Any meaningful slowdown in AI demand, a slip in the GPU supply chain, or a credit-rating event may, therefore, transform Oracle’s growth narrative into a painful deleveraging story.

What’s the consensus view on Oracle Corp?

Beyond leverage concerns, however, the fundamental momentum is difficult to ignore. Q3 marked the company’s first quarter in over 15 years of simultaneous 20% plus organic growth in both top- and bottom-line.

This is partly why Wall Street firms remain bullish as ever on ORCL stock heading into the results.

Consensus rating on the AI infrastructure firm sits at “strong buy” currently – with the mean price target of $254 indicating potential upside of nearly 25% from here.

Plus, a near 1% dividend yield makes Oracle Corp even more attractive as a long-term holding.