Oracle’s stock has plummeted 50% from its peak following the OpenAI partnership announcement, yet its infrastructure cloud revenue is accelerating at a 68% clip and its contracted backlog has exploded to $523 billion. Jefferies analyst Brent Thill maintains a Buy rating, arguing the company is in a “better spot” with accelerating growth, setting up a potential contrarian rebound ahead of March 10 earnings despite extreme bearish sentiment among institutional investors.
The narrative surrounding Oracle (ORCL) has shifted from AI darling to market pariah in just six months. When the company announced its strategic partnership with OpenAI in September 2025, the stock peaked at $308.70, reflecting sky-high expectations for its cloud infrastructure business. Since then, shares have collapsed to around $158.81 as of March 6, 2026—a 50% drawdown that has left investors questioning the bullish thesis.
Yet Jefferies analyst Brent Thill, who has long covered enterprise software, sees not a broken story but a compelling contrarian opportunity. He recently reiterated his Buy rating, acknowledging the price action while insisting the fundamentals are “accelerating” and the company is in a “better, better spot.” This disconnect between cratering valuation and improving operations creates a rare setup: extreme negative sentiment colliding with hardening growth metrics just days before a crucial earnings report.
The Setup: Price vs. Thesis
Thill’s revised price target of $320 (down from $400) often obscures his core message. The target implies roughly 100% upside from current levels, but his argument is more nuanced. He frames the stock’s decline as an overreaction to sector-wide software weakness rather than a Oracle-specific failure. The 50% drop, he notes, coincides with a period where the company’s cloud business has actually picked up speed.
To be clear, the sell-off is real. Oracle is down about 34% from its September 2025 filing date and roughly 18% year-to-date in 2026. This performance sits in stark contrast to the broader AI infrastructure rally, where peers have seen multiples expand. The market is pricing Oracle as a declining on-premise relic, not an AI-cloud player.
The Fundamentals: Acceleration in Revenue and Backlog
The data tells a different story. Oracle’s infrastructure cloud revenue—the segment tied to its AI and database offerings—has shown straight-line acceleration over the past year:
- Q3 FY2025: +49%
- Q4 FY2025: +52%
- Q1 FY2026: +55%
- Q2 FY2026: +68%
This isn’t a company that’s losing momentum; it’s one that’s gaining it. The Q2 FY2026 print, in particular, demonstrates a significant inflection point, with growth jumping 13 percentage points sequentially.
Even more telling is the surge in Remaining Performance Obligations (RPO), which represents contracted future revenue. RPO skyrocketed from $130 billion in Q3 FY2025 to $523 billion in Q2 FY2026—a 438% year-over-year increase. This isn’t just a backlog; it’s a multi-year pipeline that most cloud competitors would covet. The scale of this commitment signals that large enterprises are betting big on Oracle’s cloud for critical workloads, including AI training and inference. These figures were highlighted in recent analysis by 24/7 Wall St..
The Valuation Math: From $16 to $400
Thill’s bull case rests on a simple earnings power argument. He projects Oracle can reach $16 to $20 in earnings per share as its cloud business matures and margins improve. Applying a 20x multiple—in line with other high-growth software names—implies a share price range of $320 to $400. At today’s $158.81, the stock trades at a steep discount to this model, reflecting what Thill sees as an extreme pessimistic sentiment rather than a realistic assessment of cash flow potential.
The math underscores the gap: the market is pricing Oracle for stagnation while the company’s contracted revenue and growth rate suggest a re-rating is possible if execution continues. This gap is the essence of the contrarian bet.
Why Is Everyone Bearish? The “Software Apocalypse”
Thill’s recent meetings with institutional investors across Europe reveal a shocking level of disdain for the software sector. He reports that only 1 or 2 out of every 100 institutional investors he met are currently long software stocks. He describes the environment as a “software apocalypse” in terms of sentiment, driven by fears of AI disruption, elevated valuations from the prior cycle, and a broader risk-off movement away from growth stocks.
Oracle is caught in this downdraft despite its unique position as both a legacy enterprise vendor and an AI infrastructure contender. The stock’s collapse reflects this sector-wide disdain more than company-specific issues. That’s the opportunity: if even a fraction of that institutional capital returns to software, Oracle’s high-beta profile could fuel a sharp rally.
The Catalysts: March 10 Earnings and Beyond
With Q3 FY2026 earnings scheduled for March 10, 2026, Oracle has an immediate platform to reset the narrative. Investors will be watching three key metrics:
- Infrastructure cloud revenue growth (will it sustain or accelerate beyond 68%?)
- RPO trajectory (will the $523 billion level hold or grow?)
- Guidance for FY2027 (will management raise forecasts based on the OpenAI partnership and other AI deals?)
Should Oracle report another quarter of strong growth and a solid outlook, the disconnect between valuation and fundamentals could narrow rapidly. Thill’s contrarian thesis hinges on this moment: sentiment at an extreme, the stock beaten down, and fundamentals moving in the right direction. The risk, of course, is that the growth decelerates or the RPO growth proves to be a one-time surge from the OpenAI deal.
For now, the market is skeptical. But history shows that the most lucrative investments often occur when a company’s operational reality diverges sharply from the market’s perception. Oracle appears to be in that precise spot—down 50% but, in Jefferies’ view, in a better spot than ever.
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