Why Oracle Stock Might Be a Smart Buy (Explained Simply)

Have you ever heard grown-ups talk about "stocks" and felt confused? Don’t worry! A stock is just a tiny piece of a company that you can buy. If the company does well, your piece can become worth more. Today, we’ll look at a big tech company called Oracle (its stock ticker is ORCL) and why some people think its stock could be a good deal right now.

Oracle Chairman and CTO Larry Ellison. Image source: Oracle.

What Happened With Oracle and OpenAI?

Let’s break down the story like we’re telling a friend:

• Oracle is a huge tech giant (a really big computer company).
• Last September, Oracle made a deal with another company called OpenAI (they make smart AI like ChatGPT).
• This deal was super big — about $300 billion! That’s like 300,000 million dollars.
• When the deal was announced, Oracle’s stock price jumped 36% in one day because investors (people who buy stocks) were super excited.
• But later, people started worrying: "Can OpenAI actually do their part of this huge deal?"

Why the Stock Went Down

Here’s the tricky part:

• Oracle borrowed almost $130 billion (money they owe) by the end of their business year in May 2026 to build the stuff needed for the deal.
• Oracle’s "book value" (kind of like what the company is worth on paper) is only $43 billion. So owing $130 billion is a heavy backpack to carry!
• Because of these worries and the big debt, Oracle’s stock price fell 60% from that super-high point.

Important Point: Even though the stock dropped a lot, the market might be underestimating (thinking too little of) how much Oracle can still grow. That means it could be a buying opportunity — a chance to buy low!

1. Oracle’s Valuation Is More Reasonable Now

"Valuation" is just a fancy way of saying "how expensive the stock is compared to what the company earns."

• After the September jump, Oracle’s P/E ratio (price compared to earnings — how much you pay for $1 of profit) was 76. That was pricey!
• But then the stock price fell AND Oracle’s net income (profit) grew 37% in fiscal 2026.
• Now the P/E ratio is 22, which is cheaper than the S&P 500’s average of 32. (The S&P 500 is a list of 500 big U.S. companies.)
• Experts think profits will keep growing, dropping the "forward P/E" (future price tag) to 16.

Important Point: Even with all that debt, the lower price makes Oracle stock look more attractive to careful buyers.

2. RPO Growth Is Not All Tied to OpenAI Deal

• RPO stands for "Remaining Performance Obligations" — think of it as a backpack of future workOracle already got paid to do (a backlog).
• When the OpenAI deal was announced, OpenAI made up about two-thirds of Oracle’s $455 billion RPO.
• If OpenAI bailed, that would hurt. But in 9 months, Oracle’s backlog grew to $638 billion!
• That means Oracle booked another ~$183 billion in deals — like 60% of another OpenAI deal.
• Oracle also spent $56 billion on capex (building stuff like data centers) in fiscal 2026.

Important Point: Oracle proved it can get lots of other business. It could survive even if the OpenAI deal shrinks or disappears.

A Potential Double for Oracle

• The stuff above could let Oracle’s stock double (become 2x) in value by 2028.
• Lower stock price + higher profits = cheaper P/E (even in the teens if it doesn’t bounce back soon).
• The sell-off (price drop) acted like OpenAI was Oracle’s only hope. But ~$200 billion in new deals says otherwise.
• If you can handle the debt risk, Oracle is an "AI stock" (a company using artificial intelligence) worth a look.

Should You Buy Oracle Right Now?

Before you run to buy Oracle shares, consider this:

• The Motley Fool’s Stock Advisor team picked 10 best stocks to buy now — and Oracle was NOT on that list.
• Those 10 could make huge returns. For example:
  • Netflix was picked in 2004: $1,000 became $396,542!
  • Nvidia was picked in 2005: $1,000 became $1,299,961!
• Stock Advisor‘s average return is 931% vs. 210% for the S&P 500.
• You can see the latest top 10 list by joining their community.
• Returns as of July 16, 2026.
• Writer Will Healy owns no stocks mentioned. The Motley Fool recommends Oracle and has a disclosure policy.

Summary

Oracle’s stock soared on a $300B OpenAI deal, then dropped 60% on debt and doubt. But now:

• Its price looks cheap (P/E 22 vs. market 32).
• Its backlog grew to $638B with lots of non-OpenAI work.
• It could double by 2028 — if you can stomach the debt.

FAQ

Q1: What is Oracle?
A: Oracle is a massive tech company that sells software and cloud services (remote computers) to businesses.

Q2: What does "P/E ratio" mean in kid terms?
A: It’s how many dollars you pay for one dollar of the company’s yearly profit. Lower is usually cheaper.

Q3: What is RPO?
A: Remaining Performance Obligations — money from customers for work Oracle hasn’t finished yet, like a to-do list with cash attached.

Q4: Is Oracle safe to buy?
A: It has big debt ($130B), so it’s risky, but its cheap price and other deals make some think it’s a good bet.

Q5: What is the S&P 500?
A: A group of 500 large U.S. companies used as a report card for the overall stock market.