Oracle’s quarterly earnings and revenue did not meet analyst predictions, yet the stock saw after-hours growth due to projections for cloud growth and newly signed contracts. The company secured four multibillion-dollar deals in the fiscal first quarter, increasing remaining performance obligations to $455 billion, a jump of 359% from the previous year.
Shares rose 26% in extended trading, potentially marking the highest single-day rise for a U.S. company with a market cap above $500 billion. Oracle anticipates additional large contracts soon, expecting remaining performance obligations to surpass $500 billion. The firm boosted its cloud infrastructure growth forecast, predicting revenue of $18 billion for the fiscal year, marking a 77% increase, and up to $144 billion over five years.
For the second quarter, Oracle forecasts revenue growth of 12-14% in constant currency, above consensus, with adjusted earnings per share expected to be between $1.61 and $1.65.
Following the after-hours surge, we see implied volatility in Oracle options hitting its highest levels in over a year. This makes selling options premium an attractive strategy for the coming weeks. The market is pricing in enormous future movement, and we can take advantage of that by selling puts or put spreads below the new expected stock price.
The massive 359% increase in remaining performance obligations (RPO) signals a fundamental shift in the company’s growth trajectory, justifying the price move. We saw a similar situation with Nvidia’s stock back in May of 2023, when a huge earnings-driven gap up established a new, higher trading floor that held for months. Betting against this kind of momentum by buying puts is incredibly risky, as the market is clearly focused on the long-term AI-driven cloud contracts.
Based on current options data, the 30-day implied volatility has likely jumped above 60%, placing it in the 100th percentile of its yearly range. This environment is ideal for strategies that benefit from time decay and a decrease in volatility, often called a “volatility crush,” which typically follows such a dramatic price event. We are also seeing a flurry of analyst upgrades this morning, with average price targets already moving towards the $250 level, providing further support for the new valuation.
Therefore, a primary strategy should be to sell out-of-the-money put credit spreads with expirations in October and November 2025. This allows us to collect the inflated premium while giving the stock a cushion to settle into its new price range. This defined-risk strategy profits if Oracle’s stock stays above our chosen strike price, capitalizing on both the bullish sentiment and the eventual decline in volatility.
