Oracle (ORCL.US) is set to report its fiscal 2026 second-quarter earnings after the market closes on Wednesday, December 10 (Eastern Time). According to data from the London Stock Exchange Group (LSEG), analysts on average expect revenue of $16.22 billion, up 15.4% year-over-year, and non-GAAP earnings per share (EPS) of $1.64, a 11.6% increase.

Historically, Oracle has exceeded revenue expectations in only two of the past eight quarters, missing consensus by an average of 0.34%. Its EPS performance has been slightly better, beating estimates about half the time, but due to larger positive surprises, the average EPS beat stands at 1.02%.

Despite analysts' revenue growth expectations surpassing the company's guidance, concerns persist over Oracle's ability to deliver significant revenue growth, given ongoing supply chain constraints in data center construction. However, the market appears more focused on the performance of its cloud infrastructure business and the growth in remaining performance obligations (RPO), both of which have been strong in recent quarters. On average, Oracle's stock has risen 8.52% in the seven days following earnings releases.

Oracle's shares have weakened recently, shedding gains made after optimistic guidance three months ago. Since hitting an all-time high in September, the stock has fallen over 35%, driven by investor concerns over debt sustainability and funding gaps following reports of massive orders.

Key areas of focus for investors in this earnings report include: 1. **Debt Position**: Oracle issued $18 billion in investment-grade bonds in September, with reports suggesting it may need to raise up to $100 billion to fund data center expansion. 2. **Cash Flow**: Negative free cash flow due to soaring capital expenditures ($2.74 billion last quarter) has raised questions about when the company will return to positive cash flow. 3. **OpenAI Partnership**: Updates on the $300 billion compute supply deal with OpenAI, which accounts for a significant portion of Oracle's RPO, will be closely watched.

In Q1, Oracle reported revenue of $14.93 billion (+12.2% YoY), missing estimates by $1.17 billion, while non-GAAP EPS of $1.47 (+5.75% YoY) was $0.01 below consensus. Cloud infrastructure revenue (OCI) surged 54%, but non-GAAP operating margins dipped to 42%, down 1 percentage point YoY and 2 points sequentially.

For Q2, management guided constant-currency revenue growth of 12%–14% and non-GAAP EPS of $1.61–$1.65 (+10%–12% YoY). However, the stock's volatility post-Q1—initially spiking to a record $345.72 on a 359% RPO jump and 1,529% multi-cloud database growth—was later undone by debt concerns.

Credit default swaps (CDS) for Oracle recently widened to 105 basis points, far above peers like Alphabet (~38 bps) and Microsoft (~34 bps), reflecting market unease. Investors will seek clarity on: - The final scale of debt needed for AI infrastructure. - A timeline for restoring positive free cash flow. - Progress on the OpenAI deal, given the latter's own funding needs and competing partnerships.

Valuation-wise, Oracle trades at a forward P/E of 29.5x, below its previous 35.5x but above its five-year average of 21.3x. ARIMA modeling suggests fiscal 2026 EPS of $6.16, with a PEG ratio of 1.3 (below the industry median of 1.70). At a 29.5x P/E applied to 2027 EPS estimates of $7.29, the implied target of $215 suggests limited upside.

In summary, while Oracle’s earnings beat record is mixed, strong RPO and cloud infrastructure growth could support the stock, especially after its recent decline. The Q2 report hinges on debt transparency, cash flow recovery, and OpenAI updates. Valuation constraints and sector risks warrant caution despite potential short-term trading opportunities around earnings momentum.