Oracle Is Soaring After Blowout Earnings. 3 Reasons to Buy the Stock (and 1 Reason to Avoid It).

Oracle's (NYSE: ORCL) stock price jumped 9.2% on March 11 in response to its third-quarter fiscal 2026 earnings and updated guidance.

But the stock is still down big year to date and is over 50% off its all-time high from last September.

Here are three reasons why Oracle could be worth buying now, and one major reason to avoid the growth stock.

Image source: Getty Images.

Reasons to buy Oracle stock

1. The company is reporting accelerating growth

Oracle's Q3 cloud revenue jumped 44% year over year and now makes up over half of total revenue. This shows how Oracle is transitioning from a legacy application software business to an infrastructure cloud giant for artificial intelligence (AI).

Oracle expects $67 billion in revenue for fiscal 2026 and $90 billion in fiscal 2027 -- a 34.3% increase. Oracle's revenue will continue to accelerate as it converts its remaining performance obligations (RPO) backlog into realized revenue. Oracle exited its latest quarter with a staggering $553 billion in RPO, much of which is tied to a handful of key customers like OpenAI.

2. Oracle is reducing its cash burn

Oracle plans to reduce its cash burn as it converts its high-margin backlog into realized contracts. The AI capacity Oracle delivered in its latest quarter achieved 32% gross margins -- above its 30% guidance. So Oracle is charting a path to profitability as it works through its backlog.

It is also using a different pricing model for new contracts that involves bring-your-own-hardware and upfront customer payments. On its March 10 earnings call, Oracle said that it used this model for $29 billion in new contracts it landed in its latest quarter.

3. Oracle is a great value

The sell-off in Oracle, paired with growing earnings, has pushed its price-to-earnings (P/E) ratio down to 29 and its forward P/E to just 21.7 -- which is almost identical to the forward P/E of the S&P 500 at the time of this writing.

Oracle isn't the only major hyperscaler or tech-focused company that is cheap based on its projected growth. Nvidia and Meta Platforms recently saw their forward P/E ratios dip below the S&P 500 as analysts continue to price in solid growth relative to the index.

Patient investors who believe Oracle's growth is sustainable can buy the stock at a compelling valuation.

The main reason to avoid Oracle stock

Oracle is winning major cloud contracts, growing its backlog while realizing AI cloud revenue, and charting a path to reducing its cash burn, and the stock is inexpensive.

But Oracle's investment thesis has a glaring problem -- debt.

In its earnings release, Oracle said it has raised $30 billion through a combination of investment-grade bonds and mandatory convertible preferred stock. However, it has yet to raise the $20 billion of the at-the-market equity portion of its $50 billion program announced in February.

Oracle finished its latest quarter with $124.72 billion in notes payable and other non-current borrowings (which is basically long-term debt). That's up 41.6% year over year.

The problem with carrying a lot of debt is that it will soak up the bulk of Oracle's initial earnings growth. So Oracle is likely several years away from being free cash flow positive and financially healthy.

Daniel Foelber has positions in Nvidia and Oracle and has the following options: short March 2026 $240 calls on Oracle. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Oracle. The Motley Fool has a disclosure policy.