Oracle shares rebound 6% after earnings selloff: what's behind the move?

Oracle shares staged a sharp rebound on Monday, rising around 6% to trade near $194 as investors returned to the software giant following a steep selloff earlier this month.

Oracle shares entered the session down roughly 18% for the month.

The rally came alongside a broader market advance after US President Donald Trump announced that an agreement had been reached to end the war between the United States and Iran.

The Dow Jones Industrial Average gained 630 points, or 1.2%, and reached a new all-time intraday high.

The S&P 500 climbed 1.6%, while the Nasdaq Composite advanced 2.4%.

Analysts remain positive on growth outlook

Investor sentiment received additional support after Mizuho reiterated its Outperform rating and maintained a $320 price target on Oracle.

The firm said Oracle delivered a strong fourth-quarter performance, highlighting Infrastructure-as-a-Service revenue growth of more than 90% year over year as new capacity and the Abilene supercluster came online as scheduled.

Mizuho described Oracle's fiscal 2027 revenue guidance as a conservative starting point and said the company's bring-your-own-cloud strategy and customer prepayment model could help it reach a stage where growth becomes self-funded.

AI spending remains a key debate

The rebound follows a difficult stretch for the stock after investors reacted negatively to Oracle's latest earnings report despite the company exceeding Wall Street expectations.

Last week, Oracle shares fell sharply after management disclosed plans for an additional $20 billion capital raise and reported negative free cash flow for the fiscal year.

For its fiscal fourth quarter, Oracle reported revenue of $19.18 billion, up 21% year over year and above analyst expectations of $19.1 billion, according to LSEG data.

Adjusted earnings per share came in at $2.03, exceeding consensus estimates of $1.96.

However, investors focused on the costs associated with the company's aggressive artificial intelligence infrastructure expansion.

Oracle reported negative free cash flow of $23.7 billion for the fiscal year and said it plans to raise $40 billion through a combination of debt and equity financing.

That includes a previously announced $20 billion share sale.

The company had already raised $43 billion in debt and $5 billion in equity during fiscal 2026.

Capital expenditures surged 162% to $55.7 billion during the year.

New Chief Financial Officer Hilary Maxson said net cash outflows related to capital expenditures are expected to reach approximately $70 billion during fiscal 2027, excluding between $20 billion and $25 billion of customer prepayments.

Strong cloud growth offsets investor concerns

Despite concerns over spending, Oracle maintained its fiscal 2027 revenue target of $90 billion while increasing its adjusted earnings-per-share forecast to $8.05.

Analysts had been expecting earnings of $8.01 per share on revenue of $88.9 billion.

For the fiscal first quarter, Oracle projected adjusted earnings per share between $1.72 and $1.76 alongside revenue growth of 27% to 29%.

Analysts surveyed by LSEG had been expecting adjusted earnings per share of $1.68.

Cloud infrastructure remained a major growth driver. Revenue from the segment climbed 93% to $5.8 billion during the quarter.

The company's remaining performance obligations, a key measure of future contracted revenue, rose 363% year over year to $638 billion as of May 31.

Analysts polled by StreetAccount had been expecting approximately $595.7 billion.

Piper Sandler said in a report following the earnings release that Oracle would likely remain a debated stock but added that the firm remains constructive on the company's AI-driven consumption growth and continues to recommend the shares.

For investors, the key question remains whether Oracle's enormous AI-related spending will ultimately translate into sustained profit growth.