The “Magnificent Seven” have officially wrapped up earnings season. And like the past few quarters, they did much better than the “rest” of the market…
According to FactSet, the Mag Seven collectively grew earnings more than 27% in the fourth quarter of 2025. That was higher than the roughly 18% earnings growth the group saw in the prior quarter.
Moreover, Nvidia (NVDA), Alphabet (GOOGL), and Microsoft (MSFT) were among the top five contributors to the S&P 500 Index’s overall earnings growth.
And yet… their stock prices today aren’t showing the same strength.
The Roundhill Magnificent Seven Fund (MAGS) – which provides equal exposure to all Mag Seven stocks – is down 7% since early February.
Concerns over AI spending, tariffs, the “SaaSpocalypse,” and more have weighed on these tech giants. Microsoft, in particular, is down more than 15% year to date.
Today, I’ll highlight one AI darling that has been outperforming the Mag Seven in recent weeks: Oracle (ORCL).
Oracle is one of the most closely watched AI stocks on the market. It runs some of the most advanced data centers in the world, packed with high-performance chips and ultrafast computing power… the stuff AI relies on.
The company reports earnings later today – and investors are waiting with bated breath. Because while this software giant boasts some of the world’s biggest companies as clients in the AI race, it also faces some notable headwinds.
Plus, despite the stock’s recent performance, it’s still down significantly from its high last year. And the problems it faces could continue to drag the stock lower…
Oracle’s Recent Earnings and What Wall Street Expects This Time Around
In each of its last two quarters, Oracle has reported huge jumps in a metric called “remaining performance obligations” (“RPOs”).
Put simply, RPOs are contracted revenue that the company hasn’t received yet.
In its fiscal first-quarter 2026, Oracle signed a record-breaking $300 billion deal with ChatGPT creator OpenAI. That brought its RPOs to $455 billion – more than quadruple what it reported a year ago.
This trend continued in its fiscal second quarter, with more agreements from some of the biggest players in AI. From that quarter’s press release…
[RPOs] increased by $68 billion in Q2 – up 15% sequentially to $523 billion – highlighted by new commitments from Meta, Nvidia, and others.
Of course, with those RPOs come plans for increased spending (more on that in a bit).
For the third quarter, Wall Street expects revenue to jump about 20% to $16.9 billion. And its cloud-infrastructure segment – which includes its AI operations – is expected to see revenue surge 43% to about $9 billion, according to S&P Global.
That would put cloud revenue on an annualized pace of about $32 billion – about one-fifth of where CEO Larry Ellison said it would be by 2030.
As for RPOs, S&P Global estimates another big quarter. It projects RPO growth of 315% year over year to $541 billion.
However, that’s “only” about 3% growth from the second quarter. So unless Oracle signed some big deals to get that number well above S&P Global’s estimates, it could disappoint.
After all, if Oracle’s RPOs only grew 3% over the past three months… what would that say about the broader AI trend?
Don’t Forget About Oracle’s Cash-Flow Worries
In its second-quarter earnings report, Oracle projected $50 billion in capital expenditures (“capex”) during this fiscal year, up from its previous estimate of $35 billion.
That would be all of the free cash flow (“FCF”) that Oracle has generated over the past five years. And if the other hyperscalers are any predictor, that capex projection is going to grow further from here.
Unlike giants like Alphabet or Microsoft, Oracle doesn’t have the FCF to cover that much capex. That means it has to offer more shares and turn to the debt market to raise capital.
And it has done just that…
In February, Oracle announced plans to raise up to $50 billion this year to build out cloud infrastructure for its big-name AI clients.
Put simply, Oracle needs money now.
It has plenty of revenue coming down the pipeline. Just look at its RPOs.
But that money will come in slowly. And its cloud build-out – which it needs to be able to handle that AI demand – is happening right now. So there’s a disconnect in the timelines.
Up to half of that funding ($20 billion to $25 billion) will come from issuing new debt, with the rest coming from mandatory convertible preferred shares and common stock. In a U.S. Securities and Exchange Commission filing, Oracle said up to $20 billion of that funding will come from issuing new shares.
That’s one of the reasons my colleague and Stansberry Digest editor Corey McLaughlin says Oracle is a potential “canary in the AI coal mine.”
If Oracle can’t find the funding necessary to fuel its AI goals, that’ll raise alarm bells about the entire AI ecosystem.
And that’s not all…
The Ditched Data-Center Expansion
On Friday, Bloomberg reported that Oracle and OpenAI had cancelled their plans to expand their data-center campus in Texas.
Apparently, the decision is due to stalled negotiations over construction financing.
With Oracle’s cash flow unable to cover its spending plans, and its RPOs not rolling in for months, if not years, it’s not a surprise that funding was a hot-button issue that halted the expansion.
It marks the second notable delay for Oracle’s data-center plans, after private-equity firm Blue Owl Capital (OWL) pulled out of funding one of the company’s data centers in Michigan.
Neither of these setbacks is going to put an end to the company’s AI plans.
As noted, Oracle is still planning on securing funding via new debt and stock issuances.
However, these delays can plant a seed of doubt in investors’ heads about whether buying Oracle stock is a smart move…
Are Oracle Shares a Buy Today?
When I last looked at Oracle in December, the company’s shares had completely erased their “AI pop” and were down about 50% from their September high.
At the time, I said investors should avoid trying to catch a falling knife in Oracle shares.
Since then, the stock has fallen another 16%. So my advice was spot on.
Today, Oracle is up about 11% from its recent low in February. Over the same period, the S&P 500 is down more than 1%. And the Mag Seven have fared even worse. So let’s take another look to see if now is a good time to buy…
We’ll start with our proprietary Stansberry Score, which gauges a stock’s potential as a long-term investment…
Oracle gets a score of 64 – good for an overall grade of “B.” That’s not bad.
It gets a “B” for its financials and an “A” for capital efficiency. But its valuation is a “D,” which pulls down the company’s overall ranking.
Plus, since Oracle’s shares are in freefall, its momentum bonus is poor.
Clearly, our Stansberry Score doesn’t rank Oracle a screaming buy today. And when you add in its sky-high spending plans (well above what the business delivers in FCF) and typical volatility from earnings reports, folks should – at least for now – stay on the sidelines with this stock.
Where Else to Look for AI Investments
That’s not to say there are no good places to put your money today for exposure to AI…
My colleague and Stansberry’s Investment Advisory editor Whitney Tilson just filmed a special presentation unveiling his current favorite AI stocks. And surprisingly, not a single one of the Mag Seven made the list – not even AI darling Nvidia.
Moreover, Whitney’s brand-new scoring system just triggered a new buy signal in one stock. Click here to watch his presentation and get the name and ticker of his top AI pick.
Regards,
Nick Koziol
