Software stocks are currently under pressure worldwide. What for years was considered a reliable growth story is now being reassessed in light of the rapid advances in artificial intelligence. Investors are questioning which business models can sustainably endure in an AI-driven world - and whether the massive investments made by corporations will ultimately pay off. In this environment, Oracle’s stock has also taken a heavy hit: measured from its peak in September 2025, the company’s market value has now fallen by more than half. The share price decline reflects the skepticism of many investors. For decades, Oracle was associated with the rather unvisionary business of traditional database and enterprise applications, before surprising the market with massive spending on cloud and AI initiatives, triggering a wave of enthusiasm. This is precisely where the current debate begins: Can the company truly keep pace in an era of generative AI and hyperscaling cloud platforms? While some investors increasingly seem to answer this question in the negative, management is sending a different signal. Oracle does not want to slow down, but rather accelerate - and is digging deep into its pockets to do so. An additional USD 50 billion is to be raised through bonds and equity to finance new AI data centres.
This leads to the next stumbling block: the resulting increase in debt has irritated investors. Moreover, the recent operating performance has also dampened sentiment. In the second quarter of fiscal year 2026, revenue grew by just 14%, driven primarily by the cloud business and recurring software revenues. Traditional licence revenues, by contrast, remained under pressure - though this is not surprising given the structural shift in the business model. Operating profit increased by only around 10%, lagging revenue growth and leading to a decline in margins. Overall, Oracle failed to meet the market’s high expectations with its latest results, triggering a double-digit percentage drop in the share price on the day.
Despite short-term skepticism, Oracle is increasingly positioning itself as a provider of high-performance cloud infrastructure for data- and AI-intensive applications, and its ambitions are substantial. By 2030, the company expects the bulk of its growth to come from cloud services, particularly infrastructure. The hope is that economies of scale and long-term customer contracts will enable margins to recover over the medium term. Expressed in figures, the long-term plans are striking: by the end of the decade, Oracle aims to generate USD 166 billion in revenue from cloud infrastructure, implying annual growth of 75% over the next five years. Total group revenues are projected to reach USD 225 billion by that time. A key contributor to this growth is expected to be the recent deal with ChatGPT developer OpenAI. Together, the companies are working on a USD 500 billion project involving the construction of five new data centres. Management has also indicated that it expects adjusted gross margins of between 30% and 40% in the provision of AI cloud infrastructure. In areas such as traditional cloud software and enterprise infrastructure, margins of 65% to 80% are considered achievable. Ultimately, however, the valuation question remains. Following the sharp price decline, the stock is now trading at significantly lower levels. Yet this discount reflects uncertainty: investors must believe that today’s multi-billion-dollar investments will form the foundation for sustainable long-term growth. In addition, the cost of insuring Oracle’s debt via credit default swaps (CDS) rose to its highest level since the 2009 financial crisis at the end of 2025. Oracle thus exemplifies a broader industry dilemma: high leverage, short-term margin pressure, and a major bet on an AI-driven future.
The analyst community still appears to be hoping for a “golden” future. The average price target for Oracle shares currently stands at USD 275, implying almost a doubling from today’s level. However, sentiment remains severely depressed, making a rapid turnaround seem unlikely. The good news for investors is that the world of structured products offers suitable solutions for virtually every scenario. Leonteq provides options for skeptics, neutral investors, and optimists alike. Two new classic Barrier Reverse Convertibles (BRCs) as well as two inverse BRCs are currently available. The standard BRCs each offer a comfortable downside buffer of 50%, while the guaranteed coupons differ by currency. The CHF-denominated product pays a quarterly coupon equivalent to 11.00% p.a., while the USD version offers an attractive 15.00% p.a. These instruments are therefore designed to deliver double-digit returns in a sideways market for the underlying asset. Investors who see a greater risk of a prolonged correction can implement a partially protected “short” strategy using inverse BRCs. The structure is just as effective as that of classic Barrier Reverse Convertibles, with guaranteed coupon payments distributed quarterly. These products are also offered in two currencies: the Swiss franc version offers a coupon of 14.00% p.a., while the US dollar tranche yields as much as 17.00% p.a. The key difference compared with a conventional BRC lies in the barrier, which is set above the current share price. This means that the nominal value - and thus the maximum potential return - is only at risk if the Oracle share price rises sharply. The barrier level is set at 150%. Risk-seeking traders, whether bullish or bearish, can also find opportunities in the broad range of leveraged products. A total of more than 100 instruments are available, ranging from Warrants and Knock-Out Warrants to Mini-Futures, enabling both long and short strategies to be implemented efficiently.
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