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he numbers are out for Oracle’s Q2 fiscal 2026, and the market reaction is ugly. Shares are down more than 10% in after-hours trading and still struggling to find a base as $200 gave way.
Here is the data:
EPS: $2.26 vs $1.64 expected
Revenue: $16.06bn vs $16.19bn expected
Cloud Infrastructure Revenue: +68% y/y
Software License Revenue: -21% y/y
This is a classic case of “the bottom line doesn’t matter if the growth story has holes.” The big turnabout in sentiment is the huge AI spending commitments and the wisdom of them.
That thinking briefly led founder Larry Ellison to be the world’s richest man in September but that’s clearly marked the top and shares are down 43% since, including the after-hours drop.
On the surface, a 62-cent beat on EPS looks fantastic. In reality, it was due to a one-time $2.7 billion gain on the sale of chip designer Ampere to SoftBank for $6.5 in March. Given the performance of chip makers, that sale may have been unwise and it cuts off a potential major win for Oracle.
Investors have grown concerned about the amount of debt the company is taking on to fund a $300 billion commitment for OpenAI and other generative AI investments. Oracle is forecasting $50 billion in full-year capital expenditures, from $35 billion in September. That’s sure to rise further next year.
The legacy business also isn’t exactly healthy with software license revenue down 21%. That is a massive drag. It tells you that while the cloud business is booming (up 68%), it’s cannibalizing the old cash-cow business quickly.
Total software revenue was actually down 3%. That is not what you want to see when you are trying to pitch yourself as a high-growth AI play.
The Price Action
ORCL was already heavy coming into this print, down about 25% from the highs over the last month. The bulls were praying for a blowout to reverse the trend. They didn’t get it.
The stock is trading down below the $200.00 handle and that will be the level to watch when the market re-opens.
This article was written by Adam Button at investinglive.com.
As expected, the FOMC pulled the trigger on a 25 basis point cut today, bringing the Fed Funds target range down to 3.50% – 3.75%.
Looking ahead, the market sees a pause in January followed by a slow grind lower.
Here is the clean breakdown of the implied probabilities:
January 28 meeting
Pricing: -5.5 bps
Implied Probability: 22% chance of a cut.
Powell clearly indicated that the plan is to wait before moving again but the market saw how he said the same thing and folded in December. If the jobs numbers come in weak and CPI slips, they will cut again.
April 29 meeting, the next cut arrives
Pricing: -21.3 bps
Implied Probability: 85% chance of a 25 bps cut.
The dots point to a cut in 2026 and April is when the odds rise significantly. The base case is for a cut here or in June.
July 29: Moving Toward 3.25%
Pricing: -39.8 bps
Implied Probability: 100% chance of 1 cut + 59% chance of a 2nd cut (cumulative from today).
H2 is where it starts to get tricky as the Fed funds curve always prices in some tail risks but there is a clear bias towards a second cut that’s full priced late in the year
October 28 – December 09: The Destination
Pricing: -53.3 bps (Oct) / -52.2 bps (Dec)
Implied Probability: 100% chance of 2 full cuts and a 25% chance of a third.
Part of the dovish prices we see further out is based on who will be the next Fed chair. Betting markets have Hassett at about 75% right now and Trump is interviewing candidates this week. The bigger question is how much would a dovish chair be able to sway policy.
This article was written by Adam Button at investinglive.com.
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