Oracle Stock Has Fallen 56% From Its High and Michael Burry Is Betting It Falls Further. Is He Right?

Key Stats for Oracle Stock

• Current Price: $150.52
• Target Price (Mid): ~$515
• Street Target: ~$246
• Potential Total Return: ~242%
• Annualized IRR: ~29% / year

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What Happened?

Oracle Corporation (ORCL) has lost more than half its value since September 2025, sliding from a $345.72 peak to around $150 today, and the investor who called the 2008 housing collapse just placed a bet that the pain is not over. Michael Burry disclosed on his Substack in early August that he shorted Oracle at $144.63, then added to the position at roughly $152. That disclosure is a Substack post, not a regulatory filing, so the size of the position is his to characterize. But the argument underneath it is specific enough to check against Oracle’s own numbers.

Oracle closed its best fiscal year ever in May, with a record $638 billion in contracted backlog and cloud infrastructure revenue up 93% in the fourth quarter. Yet the stock trades roughly 56% below its high, S&P cut its credit rating in July, and now a well-known short-seller is piling on. Both the demand and the doubt are real at once, and the gap between them is why the stock is interesting here.

What Burry Is Actually Arguing, and What the Filings Show

Burry’s case is that the demand is an accounting argument. He contends Oracle depreciates its expensive GPUs too slowly, which flatters current earnings, and he estimates the company’s profits could be overstated by 26% to 27% by 2028. He pairs that with concern about long-term lease and off-balance-sheet obligations that dwarf current revenue, describing the largest AI infrastructure names as overfed targets that are easy to bet against.

If a GPU is written down over six years but becomes obsolete in four, reported profit today is borrowing from losses tomorrow. Oracle’s fourth-quarter free cash flow was negative $1.87 billion despite $6.15 billion in reported net income, so the cash and the accounting profit already tell different stories. That divergence is what a skeptic points to.

Oracle’s own disclosures push back on the contract structure. On the Q4 call, co-CEO Clay Magouyrk said Oracle signed $67 billion in AI infrastructure contracts in the quarter, “the majority of which was either bring-your-own-hardware or prepaid,” lifting that category to $75 billion, with those contracts having no degradation in margin compared to our other contracts.” In a bring-your-own-hardware deal, the customer supplies the GPUs, so the depreciation risk that Burry models sits on the customer’s balance sheet. That covers only about 12% of the $638 billion backlog, so it narrows the concern rather than erasing it. The capital Oracle deploys itself still carries the risk Burry is flagging.

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The Backlog Is Real, but the Cash Comes Later

The bull case rests on one number: $638 billion in remaining performance obligations, up 363% year over year. CFO Hilary Maxson said Oracle expects 12% of that to convert to revenue within twelve months and another 34% between 13 and 36 months. That is contracted revenue, and it is why analysts model forward two-year revenue growth around 39% on TIKR’s data.

On July 9, S&P Global cut Oracle’s credit rating one notch to BBB-, a single step above junk, and singled out a specific vulnerability: OpenAI accounts for roughly half of the $638 billion backlog. OpenAI is private, unprofitable, and cash-burning, so if it cannot meet its obligations, Oracle could be left holding long-term data center leases it cannot easily re-let. S&P also widened its fiscal 2027 free cash flow deficit forecast for Oracle to nearly $42 billion and expects leverage to push past its comfort threshold. That is a rating agency moving in Burry’s direction weeks before he disclosed his short.

The counterweight is that S&P kept a stable outlook and left Oracle investment grade, and that the bring-your-own-hardware structure covers part of the book. Still, the delivery cost is steep. Oracle guided to roughly $70 billion in net cash outlay for capital expenditures in fiscal 2027 and plans to raise around $40 billion in debt and equity to fund it, against net debt already near $135 billion. Maxson gave investors a way to judge whether it pays off: the infrastructure business generates return on invested capital “in the high 20s at a steady state,” measured as after-tax operating margin plus depreciation over gross investment, once a project’s revenue has ramped. High-20s ROIC on completed data centers makes the capital intensity a feature.

Cheap Against Peers, if the EBITDA Is Honest

The recovery from the late-July low near $114.50 came with substance. Oracle deepened its Google Cloud partnership in late July, bringing Google’s Gemini models into Oracle Fusion Applications and NetSuite, and the stock jumped 9.22% on August 3. A defense software agreement worth up to nearly $7 billion added momentum, before the stock fell about 4% on August 14 as the Burry disclosure and reports of further layoffs, on top of the roughly 21,000 jobs Oracle cut over the prior year, weighed on sentiment. Every AI data point now moves the price, because the market cannot agree on what the backlog is worth net of the debt required to serve it.

Against its peers, Oracle does not screen as expensive on the metric that matters most for a capital-intensive business. It trades at 11.82x NTM EV/EBITDA, below Microsoft at 15.57x and ServiceNow at 19.47x, and roughly in line with Salesforce at 11.32x, per TIKR’s Competitors page. For a company growing infrastructure revenue near triple digits, an EBITDA multiple beneath the slower-growing Microsoft is the quantitative bull case. The discount is defensible only if the EBITDA is real and the depreciation is honest, which loops back to Burry’s question.

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TIKR Advanced Model Analysis

• Current Price: $150.52
• Target Price (Mid): ~$515
• Potential Total Return: ~242%
• Annualized IRR: ~29% / year

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TIKR’s valuation model, using mid-case assumptions realized in mid-2031, points to a target of around $515, roughly 242% total return, or about 29% per year over 4.8 years. The model’s entry price is $150.52, just below the latest close.

Two drivers carry that number. The first is revenue growth, modeled around 22% annually, powered by OCI infrastructure and the multicloud database business, where Q4 revenue grew 404% year over year off a small base. The second is the conversion of the $638 billion backlog into recognized revenue as capacity comes online. The margin driver is infrastructure operating leverage: management expects gross margin to compress near-term during the ramp, then recover as data centers reach full contractual revenue. The primary risk is the mirror image, that free cash flow stays negative longer than modeled, and leverage forces Oracle to raise capital on worse terms.

The upside is that Oracle converts a backlog no competitor can match into high-20s ROIC infrastructure and re-rates as free cash flow turns positive. The downside is that Burry is right about depreciation and overbuilding, steady-state returns disappoint, and the debt funding the buildout compresses equity value even if revenue grows as promised.

Conclusion

The next real test is the fiscal 2027 gross margin trajectory. Management said margins would step down early in the year on ramp costs, then recover as contracted revenue fills capacity. Watch the Q1 report on September 10 for two things: whether cloud revenue growth lands in the guided 58% to 64% range, and whether management signals infrastructure margin bottoming. Growth inside that band with a credible margin-recovery signal validates the bull case and pressures the short.

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Should You Invest in Oracle?

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Pull up Oracle, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!