Oracle stock price has sunk into a correction after crashing by 10% from its highest level this year. ORCL tumbled to a low of $234, its lowest swing since July 15. This article explains why Larry Ellison’s company may tumble by another 16% to $196.
Oracle is silently benefiting from the AI hype
Hyperscalers like Microsoft, Google, and Meta Platforms make all the headlines in the artificial intelligence (AI) industry. Oracle barely get any mention, even though its AI and cloud business is doing relatively well.
The most recent results showed that its revenue rose by 11% in the fourth quarter to $15.9 billion. This growth was driven by its cloud services and license support, whose revenue jumped by 14% to $11.7 billion.
Its other divisions like cloud license and on-premise license’ revenue rose by 9% and 8%, respectively.
Most importantly, the company’s Remaining Performance Obligations (RPO) rose by 41% to $138 billion. That is a sign that its demand is rising, as Safra Catz noted in her earnings statement. She insisted that while 2025 was a great year, 2026 would be even greater.
Read more: Oracle stock at record high: time to take profits or let it run?
One reason for this optimism is that Oracle is investing in data centers as the AI workloads jump. The company ended the last quarter with 23 multicloud data centers and was actively constructing 47 more that will go live in the next 12 months. In a statement, Larry Ellison said:
“We expect triple-digit MultiCloud revenue growth to continue in FY26. Revenue from Oracle Cloud@Customer datacenters grew 104% year-over-year. We have 29 Oracle Cloud@Customer dedicated datacenters live with another 30 being built in FY26.”
Valuation concerns remain
The main challenge with Oracle is that the recent stock surge has made it a highly overvalued company. Indeed, its valuation multiples are much higher than those of other faster-growing companies.
For example, the firm has a forward P/E ratio of 51, much higher than the industry median of 29. Its non-GAAP P/E ratio of 36 is also higher than other companies.
For example, NVIDIA, whose revenue is growing by over 50%, has a forward P/E ratio of 50. Similarly, Oracle’s valuation metrics are significantly higher than those of other companies, such as Google, Microsoft, and Amazon.
As such, the company will need to execute well and beat analysts’ estimates to justify this valuation. The average revenue estimate for the current quarter is $15 billion, up by 13% YoY. It is also expected to make $66 billion and $79 billion in the next two financial years.
Oracle stock price analysis
ORCL stock chart by TradingView
The daily timeframe chart shows that the ORCL stock price has plunged in the past few days, as we predicted. It moved from a high of $260.80 on July 30th to th current $234.
The ongoing plunge is part of mean reversion, a situation where an asset drops to its historical averages. At the same time, the Relative Strength Index (RSI) and the MACD indicators have formed a bearish divergence as they continue to fall.
Therefore, the most likely continue falling as sellers target the resistance at $196, its highest swing in December last year. This target is about 16% below the current level and will be a continuation sign, meaning that the stock will then bounce back.
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