Oracle is set to release its fiscal second-quarter earnings next Wednesday, with its stock under pressure due to massive AI investments and reliance on OpenAI. The enterprise tech giant, with a market cap of $807.7 billion, has seen its shares drop over 35% since hitting an all-time high in September and is now testing its 200-day moving average. Despite financing concerns, analysts believe the upcoming earnings report may address investor worries in two critical areas.

TD Cowen analyst Derrick Wood maintains a Buy rating on Oracle with a $400 price target. He noted that Q2 should mark the first quarter of accelerating growth for Oracle Cloud Infrastructure (OCI), with further acceleration expected in the second half as the Abilene data center comes online.

This optimism stems from Oracle's large-scale "Stargate" data center project in Abilene, Texas, developed in partnership with OpenAI. The project's smooth progress will help address the substantial backlog in cloud infrastructure demand.

Management is also expected to provide more details on capital expenditures and financing needs. Wood suggests actual requirements may be below market consensus, potentially easing investor concerns about debt burdens.

Cloud Growth Poised for Significant Acceleration

Wood projects OCI growth will show notable improvement. After four quarters of 51%-54% growth, Q2 could reach ~65%, followed by ~80% in Q3 and potentially ~100% in Q4.

Industry surveys confirm the Abilene data center project remains on schedule—a crucial development as Oracle works through its massive cloud infrastructure backlog. In September, Oracle shares surged after Q1 earnings revealed a 359% jump in remaining performance obligations (RPO) to $455 billion through August.

The backlog reportedly includes a $300 billion cloud infrastructure deal with OpenAI, signaling Oracle's successful entry into the cloud infrastructure market dominated by Amazon, Microsoft, and Alphabet.

Capital Expenditure Concerns May Subside

However, Oracle shares have since erased all September gains as investors questioned how the company would fund necessary data center expansions. Oracle has turned to debt financing through bond offerings while significantly increasing capital expenditures.

"Capital spending and financing needs have been investors' top concerns over the past two months, weighing on the stock," Wood said. "Below-consensus capex would also mean lower debt needs. We believe these concerns could be addressed during the earnings call, including commitments to maintain investment-grade debt levels."

Oracle shares recently traded near $211.52, just below the 200-day moving average where they've lingered since November 20. While the stock remains up 28% year-to-date, it's down over 35% from September's record high.

Analysts expect Q2 EPS of $1.29, up 12.2% year-over-year. Oracle has met or beaten Wall Street estimates in three of the past four quarters, with one miss. Q1 EPS of $1.20 exceeded expectations by 4.4%.

For fiscal 2026, analysts project EPS of $5.41 (up 23% YoY), with 19.4% growth to $6.46 expected in fiscal 2027.