Why Oracle May Underperform

Legacy Business Decline:

Oracle’s on-premises software and hardware revenues remain a significant portion of its business, but these segments are in secular decline as customers migrate to modern, cloud-based solutions. Revenue from license support, once a cornerstone, remains flat, indicating stagnation.

Lagging in Cloud Market Share:

Oracle’s 3%-6% global cloud market share is dwarfed by competitors like AWS (31%), Microsoft Azure (23%), and Google Cloud (12%). While Oracle’s cloud services grew 24% YoY in fiscal Q2 2025, much of this growth is reliant on integration with competitors’ platforms, leaving Oracle dependent on and trailing these hyperscalers.

Eroding Competitive Advantage:

Enterprises prioritize flexibility, cost-efficiency, and security, driving many to open-source alternatives such as PostgreSQL and MongoDB or to cloud leaders like AWS and Azure. Oracle’s investments, including an $8 billion push into Japan’s cloud and AI market, may not suffice to close the competitive gap.

External Headwinds:

Rising infrastructure costs and inflationary pressures may further impact profitability. Geographically, Oracle relies heavily on the Americas, which account for 63% of revenue. A slowdown in U.S. tech spending could have outsized effects.

Potential Drawbacks of Short-selling Oracle Stock

While Oracle presents a short trade opportunity, there are risks associated with this approach:

Cloud Momentum:

Cloud services now account for 42% of total revenue and continue to grow. If Oracle accelerates its cloud initiatives or secures major partnerships, short positions could face unexpected losses.

Strong Brand and Market Perception:

Oracle remains a trusted enterprise IT vendor with a broad customer base across industries. This reputation could sustain stock performance, even if growth slows.

Limited Catalysts:

Oracle’s management primarily communicates around earnings season, and the absence of frequent updates could delay market reactions to underperformance.

Conclusion:

Oracle’s growth story is clouded by declining legacy revenues, low cloud market share, and intense competition, making its current valuation appear vulnerable. However, the resilience of its brand, continued cloud momentum, and unpredictable external factors warrant caution when shorting. For those considering this trade, timing and monitoring industry developments will be crucial to managing risks.

Disclaimer

All analysis by Regal Capital is for informational purposes only and does not constitute financial advice. It is not a recommendation to buy, hold, or sell any securities. Investors should conduct their research, seek professional advice, and consider their financial goals and risk tolerance before making investment decisions. The author and associated parties assume no responsibility for the accuracy or completeness of the information provided and any losses that may be incurred from use of the information provided. Past performance is not indicative of future results, and investment risks apply. The author may hold positions in discussed securities, which may change without notice.