Oracle (ORCL) reports quarterly results after the closing bell, an unofficial end to earnings season. Wall Street expects adjusted earnings of $1.74 per share and revenue above $19.1 billion. Both would be faster growth than a year ago.
The core question
The bigger test is whether Oracle's cloud growth can justify its large AI infrastructure spending and rising debt. The company is expected to generate negative free cash flow into 2029. Its credit rating now sits at the lowest investment grade level. Shares have bounced back more than 35% from their July low but remain down more than 18% this year.
The bull-and-bear case
Oracle (ORCL) is a polarizing company. Oracle Cloud Infrastructure is growing strong and putting up big numbers. The problem is the balance sheet: four times leverage, heavy capex, and free cash flow that looks ugly. The company is talking about new methods, like having customers capitalize commitments before the returns show up.
On valuation, Oracle's PE over the past 10 years ranged from 26.8 to 28.5. It now sits at 27.7, right in the middle. So it is not cheap on a PE basis. It was very expensive when the multiple was higher. Oracle must show it can get through a dark period and deliver results on the other side, because the free cash flow, capex, and leverage all look weak.
Oracle is taking on debt right now. Remaining performance obligations (RPO, the value of signed contracts not yet delivered) spiked to about $630 billion, most of it from OpenAI. One year ago, on September 10, the stock hit its all-time high after earnings when Oracle announced the OpenAI deal, $300 billion of that RPO. The stock hit $345, then pulled back.
Free cash flow is now negative as of last quarter. Capex grew about 162% in fiscal 2026 to about $55.7 billion, and is set to reach about $70 billion next fiscal year. Oracle is taking on debt to build AI data centers. Much of the revenue from those RPOs does not come due until 2027, 2028, and 2029. So Oracle will tap those RPOs later while borrowing now in a high interest rate environment. That concern is why the stock is down over 50% from its all-time high one year ago.
Key things to watch in the report: are they booking more business, are they making progress on financing, and how large is capex spending. The growth numbers will probably be there.
The bullish trade: call calendar
This paper-money trade is bullish and uses the wide gap in implied volatility between expirations. Front expiration (September 11) implied volatility is 256, while September 18 is only 111 - a 140-point difference. The expected move is around $17.5.
The trade is a one-week 175 call calendar: buy the September 18 175 call, sell the September 11 175 call, for about a $110 debit (maybe trading a bit lower, around a $15... trading lower now). The volatility gap makes the calendar affordable for a stock priced as high as Oracle (ORCL).
The trade needs a calm to slightly higher move. It cannot fall another $20 or it loses money. The break-even is wide because the 175 call in the September 11 series still trades about $3.40. It will not be a home run, but it can be a decent winner if the stock stays in range or moves slightly higher.
Breaking it down: the 175 strike is about $20 out of the money to the upside, just over the one standard deviation move the option market is pricing, roughly plus or minus $17.5, about 11% in either direction. You pay a $110 debit, which is the risk. You make the most money if the stock rises to at or near 175, with a profitable range of about $20 to $25 on either side of 175. The $3.40 of extrinsic premium in the sold near-term 175 call goes to zero if the stock stays below 175, which covers much of the cost of the September 18 monthly option that expires in 8 days.
What you do not want: the stock falling from here, or rising past 200 to 205. That is where profit turns to loss. Avoid any two- or three-standard-deviation move in either direction.
The bearish trade: put diagonal
This strategy also uses the volatility gap but is more directional. It is a bearish put diagonal in the same option series: buy the September 18 monthly 160 put (in the money by about $5), sell the September 11 weekly 145 put. That is a $15-wide diagonal for a debit of about $8 (closer to $8.60 now, since a pullback in the stock expands the price). The debit is about half the $15 width. Anything below about 156 to 157 is profitable, so the trade is already in its profit range.
The shared logic
Both trades share one idea in opposite directions: buy the implied volatility that is 140 points below the front expiration. That gap is where the edge or value sits, something hard to find in current markets. It does not guarantee profit, but it gives the best chance at it.
