Oracle Shares Decline Following Rothschild & Co Redburn's 'Sell' Rating

Oracle Stock Experiences Downturn on Analyst Downgrade

Oracle Corporation (NYSE: ORCL) saw its stock price decline by 5.55% on September 25, 2025, closing at $291.33. This notable movement followed the initiation of coverage by Rothschild & Co Redburn with a 'Sell' rating, casting a shadow over the tech giant's market valuation, particularly concerning its burgeoning cloud business.

Rothschild & Co Redburn's Bearish Stance on Cloud Valuation

Rothschild & Co Redburn's new coverage, led by analyst Alex Haissl, set a price target of $175.00 for ORCL, implying a potential downside of 43.34% from the stock's previous close. The core of this bearish outlook centers on the belief that the market "materially overestimates the value of Oracle's contracted cloud revenues."

According to the firm's analysis, Oracle's five-year Oracle Cloud Infrastructure (OCI) revenue guidance, equating to approximately $60 billion, represents a "risky blue-sky scenario that is unlikely to materialize." Furthermore, the report characterized Oracle's role in large, single-tenant deployments, such as its partnership with OpenAI, as "closer to that of a financier than a cloud provider," suggesting that the economic fundamentals differ significantly from what investors typically value in cloud companies. This model, they argue, lacks the operating leverage of traditional hyperscalers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, where upside from utilization gains and higher-value product layers accrues more directly to the provider.

Financially, InvestingPro data indicates Oracle is trading at elevated multiples, with a Price-to-Earnings (P/E) ratio of 70.8, suggesting an overvaluation based on its Fair Value metrics. The company recently reported Q1 earnings of $1.47 per share, slightly missing analyst consensus estimates of $1.48. While revenue increased by 12.2% year-over-year to $14.93 billion, it also fell short of expectations of $15.04 billion.

Concerns were also raised regarding Oracle's capital expenditure plans, with fiscal 2026 guidance raised to $35 billion and projections possibly exceeding $60 billion by fiscal 2028. The company's reported plan for a $15 billion bond offering has fueled apprehension about increasing debt levels, already noted by S&P Global Ratings with a 'BBB' rating and a negative outlook.

Divergent Analyst Perspectives and Oracle's Strategic Cloud Push

Rothschild & Co Redburn's 'Sell' rating stands in stark contrast to the broader consensus among other major analysts, who generally hold more positive assessments of Oracle's prospects. As of September 25, 2025, a consensus of 30 analysts covering Oracle stock had an average price target of $314.63, forecasting an 8.00% increase over the next year. Other firms, such as Guggenheim, JMP Securities, and KeyBanc, maintained or raised their price targets significantly higher, ranging up to $375.00, largely with 'Buy' or 'Outperform' ratings.

Despite the recent downgrade, Oracle remains aggressively focused on expanding its OCI and AI services. The company has secured massive contracts with industry leaders like OpenAI and Meta Platforms, solidifying its position in the rapidly growing AI landscape. Oracle has projected substantial growth for OCI, expecting a 77% increase this fiscal year to reach $18 billion, with projections of $144 billion over the next four years. The company's remaining performance obligation (RPO) of $138 billion provides considerable visibility into its future revenue stream, securing approximately two and a half years' worth of revenue at its current rate. Oracle's CEO, Safra Catz, has also highlighted fiscal 2026 as a "tipping point" in the company's cloud transition, with raised revenue guidance to $67 billion and combined cloud growth expected to exceed 40%.

Broader Market Dynamics and AI Valuation Scrutiny

Oracle's decline on September 25, 2025, occurred within a broader market downturn, with the Nasdaq, S&P 500, and Dow Jones Industrial Average all experiencing declines of 0.5%, 0.5%, and 0.4% respectively. This market weakness was partly attributed to stronger-than-expected U.S. economic data, which boosted bond yields and tempered expectations for Federal Reserve interest rate cuts. Additionally, concerns surrounding chip stocks contributed to the broader tech sector's challenges.

This event underscores a maturing phase in the "AI trade," where initial speculative fervor is giving way to a more discerning investment approach. Analysts and investors are increasingly scrutinizing valuations, demanding tangible results, clear profitability, and foundational utility from AI initiatives, rather than merely ambitious projections. The conflicting analyst opinions on Oracle highlight the ongoing debate regarding the true long-term value and economic model of various players in the highly competitive and capital-intensive cloud and AI infrastructure markets. Future market sentiment for Oracle will likely hinge on the company's ability to demonstrate the sustained profitability and unique competitive advantages of its OCI offerings amidst increasing scrutiny.