Oracle Up 15% From Bottom: Is the Selloff Over?
$Oracle (ORCL.US)$ ’s share price surged 35% after it released its FY2026 Q1 earnings on September 6. But what followed was a stunning reversal: the stock plunged from a peak of 345 to recent trough of 185, losing about half of its market-cap. The selloff lasted the entire quarter. Now, from the low of 185 to yesterday’s close at 214, Oracle has rebounded more than 15%.
So what drove Oracle’s journey from post-earnings euphoria to disappointment after September? Can the current rebound last? And how should we view the stock in 2026? This article breaks it down.
The key catalyst behind the 35% post-earnings spike was Oracle’s disclosure of an eye-popping $455 billion in Remaining Performance Obligations (RPO). Management also indicated it expects to sign more customers of similar scale going forward. So investors essentially priced Oracle as one of the most direct and levered AI compute infrastructure plays.
In reality, Oracle’s RPO had already been building before FY2026 Q1 (September). Since FY2024, RPO momentum had been accumulating, reaching $137.8 billion by the end of FY2025. The RPO/Revenue ratio also surged rapidly from around ~1x to ~2.4x.
But the market soon identified a flaw in the logic. Even setting aside the extremely long delivery timelines implied by such a massive backlog, fulfilling these orders would require Oracle to invest heavily in compute infrastructure. That, in turn, means massive capital expenditures and a sharp rise in debt—side effects that quickly began to show up in the company’s financials. From the table below, we can see Oracle’s total interest-bearing debt started to surge from FY2025 year-end (2025.5.31), while capex also began accelerating.
This shift in the company’s financing profile was reflected in a rapid widening of its credit default swap (CDS) spreads. In early 2023, Oracle’s CDS spread was around 45bp, below IBM’s. But by September 2025, Oracle’s CDS spread reportedly peaked above 80, ranking as the highest among the five major cloud computing companies. This became a key driver behind Oracle’s ongoing valuation de-rating.
Though, a full-quarter decline has pushed the stock into an oversold zone, and from valuational and technical viewm, the sell-off might have come to an end.
Technically speaking, the recent low at 185 directly challenged the large gap left after the early-June earnings release (178–188). The Street appears to be searching for a rationale for potential upside.
From a valuation perspective, major sell-side houses are broadly aligned on FY2026 revenue estimates around $66–67 billion. With today’s market cap at $611 billion, that implies a forward P/S of 9.2x, which sits in a “normal” range. Looking forward to FY2027, the multiple drops to just 7.4x.
Meanwhile, the recognition schedule for the $455 billion RPO appears relatively conservative: only about 35% is expected to be recognized over the next 3–4 years, while as much as 31% may only be recognized six years out or later. Historically, Oracle’s RPO conversion pace was closer to being largely recognized within three years.
Options Strategy
The market is currently pricing a post-earnings expected move (EM) of roughly 11 points. This means the stock needs to move more than about 11% after earnings for weekly options expiring to deliver profits.
After significant rebound, Oracle’s implied volatility remains elevated, sitting at the 94th percentile—favorable for the short side.
Historically speaking, implied volatility typically collapses sharply after the print, usually by 12–20 points. There was even an instance in FY2024 Q3 (March 2024) when IV dropped as much as 22 points post-earnings. As long as this earnings reaction is not unusually violent (for example, a 15%+ move), an IV crush remains the base case.
Therefore, if investors believe Oracle’s price action will stabilize after earnings and implied volatility will normalize lower over time, then a single-leg short put or a short strangle could be a relatively steady approach.
Strategy Takeaways
Short Put / Short Strangle
Strike Prices: Whether on the call leg or put leg, strikes should be set far enough out-of-the-money from spot—e.g., at least 20% away (for example, call-side above 260 and put-side below 160).
Expiry: With the stock already at a lower level, the call leg's expiry should be kept as short as possible, ideally within three months; otherwise, once Oracle’s narrative repairs and the stock trends higher over time, assignment risk rises. By contrast, the put leg can be dated longer, such as 4–6 months.
p.s. If logic under Oracle had been repaired, other Cloud or Neo-cloud stock' sell-off might have also ended. $Microsoft (MSFT.US)$ $CoreWeave (CRWV.US)$ $NVIDIA (NVDA.US)$ $NEBIUS (NBIS.US)$ $IREN Ltd (IREN.US)$
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Rockyturki : Thanks for the insightful analysis
Digital Cat : With Oracle’s rebound, do you think it’s a good time to buy now or wait for a dip again?
Jimmy 1133 Digital Cat : look at the tech chart.. I would keep an eye on RSI, volume profile and candle stick pattern..
my me : nice
104451821 : thank you for analysis
AD HING : Good
Kelly5526 : no.
Kelly5526 : thank you
for your information and analysis.
Sayme : time to![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
EarlyGrowthInvestor : IMO it fell drastically due to the spending overture, but the expected ROI into AI infrastructure can’t be measured yet, thus we have a scared market.
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