Oracle’s Co-CEOs Deliver Explosive Growth, but Stock Plunges 50% in Their First Year

In the first year of the recent co-CEO era at Oracle (NYSE:ORCL), the stock has plummeted by 50%, despite delivering a $664 billion contract backlog and a 121% growth in cloud infrastructure revenue. Q1 capex amounted to $28.5 billion, while free cash flow turned negative at $5.4 billion. Oracle's FY27 spending guidance reached $90 to $95 billion.

Wall Street's sentiment remains optimistic, with 82% bullish on the stock, citing a $238 consensus target. However, ORCL did not make the list of 24/7 Wall St's top 10 stocks to buy now. The co-CEOs, Clay Magouyrk and Mike Sicilia, took over near the peak of the company's performance. Under their leadership, the contracted business grew at a pace rarely seen in enterprise software.

The remaining performance obligations increased by $209 billion year-over-year, and cloud infrastructure revenue grew by an astounding 121%. Oracle also booked over $30 billion in new AI cloud contracts in a single quarter. Despite these impressive figures, the operational execution is under scrutiny due to high capital intensity.

Q1 capex surged to $28.5 billion, resulting in negative free cash flow of $5.4 billion. Oracle completed a $20 billion equity issuance, causing the interest expense to rise by 55% to $1.4 billion. CFO Hilary Maxson has warned of a potential five-percentage-point gross margin decline for fiscal 2026. The co-CEOs inherited businesses they already managed and achieved impressive scale, but it remains to be seen if operating cash flow will outpace net cash capex. Wall Street remains 82% bullish, with a $237.97 consensus price target.