ORCL Stock Drops Premarket: OpenAI Reportedly Misses Targets, Raising Concerns Over Oracle’s $300B Cloud Deal

• Oracle shares declined 4.2% in Tuesday’s premarket session.
• Veteran hedge fund manager George Noble said that Wall Street is “understating” Oracle’s actual debt exposure.
• Stockwits sentiment for ORCL was ‘neutral’ on Tuesday.

Oracle Corp. shares fell 4.2% in early premarket trading on Tuesday after a report said one of its largest customers, OpenAI, missed internal revenue and user growth targets, raising fresh concerns about the cloud giant’s revenue visibility.

Oracle has a massive $300 billion, five-year cloud deal with OpenAI, announced last September. Oracle is taking on massive debt to build new data centers ahead of the deal’s start, with revenues expected to begin flowing in only next year.

On Monday, the Wall Street Journal reported, citing sources, that OpenAI had missed its targets for new users and revenue, and that CFO Sarah Friar reportedly told company leaders she is worried OpenAI might be unable to pay for future computing contracts if revenue doesn’t grow fast enough.

The development is a concern for Oracle, retail traders argued. In the past year, Oracle’s rising debt, data center investment, and customer concentrations have worried investors. 

The company’s total debt increased 60% to a record $153.1 billion last quarter, while remaining performance obligations increased 325% to $533 billion. Oracle is raising $50 billion through a mix of debt and equity to fund new data centers to meet those orders.

Analyst Sounds Alarm

George Noble, a hedge fund veteran and former Fidelity fund manager, sounded warning. In a long X post on Monday, he said Oracle’s AI push is built on shaky foundations: first, its balance sheet is heavily stretched, with debt and liabilities surging, negative free cash flow, and aggressive borrowing are concerning.

“Oracle has been using project financing structures (loans repaid from projected future cashflow) to keep tens of billions more in borrowing off its balance sheet entirely. So when analysts quote Oracle's debt load, they're UNDERSTATING the actual exposure by a meaningful margin,” 

Oracle shares are down 50% from their 52-week high last September. Currently, 34 of 44 analysts rate the stock ‘Buy’ or higher, with an average price target of $243.23 (40% upside projection), according to Koyfin.

Noble argued that much of Oracle’s bullish case hinges on a concentrated and risky bet – particularly a massive OpenAI contract tied to future revenue and an unprofitable customer – while projects like Stargate face delays and lender skepticism. 

Third, the earnings story may be flattered by accounting moves and cost cuts, even as layoffs fund capex, leading to the broader warning that the narrative could “end HORRIBLY.”

Retail’s View On ORCL

On Stocktwits, the retail sentiment for ORCL has declined in the past week and was ‘neutral’ on Tuesday. “$ORCL OpenAI news going to drop it hard today,” a trader said, while another wrote, “$ORCL embarrassing stock and embarrassed that i bought it.”

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