Oracle’s Record $638 Billion Backlog Couldn’t Stop a Stock Slide

Oracle’s cloud backlog swelled to a record $638 billion in its fiscal fourth quarter, beating Wall Street’s forecast by more than $40 billion. The stock fell anyway. Revenue climbed 21% to $19.2 billion and adjusted profit topped estimates too, but investors zeroed in on the far larger sum Oracle says it must borrow and raise to build the AI data centers that backlog demands.

The June 10 report capped a year in which Oracle’s fortunes became tied to one customer, OpenAI. Now, with OpenAI working toward an initial public offering that could determine whether Oracle ever collects on its biggest contracts, the gap between booked demand and cash in hand has become the argument Wall Street can’t settle.

Oracle Beat the Street on Almost Every Number

Analysts had modeled a good quarter, just not this good. A Bloomberg survey had penciled in adjusted earnings of $1.97 a share on $19 billion of revenue, with total cloud revenue reaching $9.99 billion. Separately, LSEG’s poll of Wall Street had modeled $1.96 a share.

Oracle’s actual numbers landed above both bars on the metrics that mattered most, and just under them on a couple of others. Adjusted earnings per share came to $2.03, excluding one-time investment gains, on revenue of $19.18 billion. Remaining performance obligations reached $638 billion, an increase of 363% from a year earlier and $85 billion more than the prior quarter alone.

Two lines missed. Total cloud revenue and cloud applications each came in a touch below what analysts wanted, evidence that Oracle’s older software subscription business is growing far slower than the infrastructure side feeding AI training jobs. Cloud infrastructure revenue jumped 93% to $5.8 billion. Cloud applications rose just 10%, to $4.1 billion.

The Stock Fell 10% Anyway

Shares dropped 10% in extended trading within minutes of the release. They kept falling. By the end of that week, Oracle stock had lost 17%, landing near a 52-week low around $148 a share, and shares were still consolidating in the $148 to $153 range three weeks later.

The numbers explain the reaction. Oracle’s own record results filing shows capital expenditures jumped 162% for the fiscal year, to $55.7 billion. Free cash flow went negative by $23.7 billion. Depreciation nearly doubled, to $7.62 billion, as newly built data centers started aging on the books before fully ramping revenue.

More spending is coming. Chief financial officer Hilary Maxson, a former Schneider Electric executive hired during the quarter, told analysts Oracle expects a net cash outlay of about $70 billion for capital expenditures in fiscal 2027. Reported capex will run $20 billion to $25 billion higher because of customer prepayments and timing, which lines up with Morningstar’s separate estimate that total spending climbs to $90 billion to $95 billion for the year. On top of the $43 billion in debt and $5 billion in equity Oracle already raised in fiscal 2026, the company now plans to raise roughly $40 billion more, including a $20 billion share sale.

Economist Mohamed El-Erian summed up the mood on X, writing that the reaction illustrates investors’ sensitivity to revenue shortfalls during periods of significant capex spending tied to AI. He noted credit default swaps, contracts that let investors insure against a company defaulting on its debt, had widened on Oracle’s name the same day.

Oracle isn’t alone in learning that a beat doesn’t guarantee a rally. Weeks later, Logitech posted record profit even as several banks turned bearish on the stock, a sign this earnings season is rewarding cash discipline over growth headlines across tech.

OpenAI Is Carrying More Than Half the Backlog

Bank of America, which recommends buying Oracle shares, estimates OpenAI alone accounts for over 50% of the $638 billion backlog. That concentration sits at the center of nearly every bearish argument on the stock.

Ed Zitron, a technology writer and outspoken critic of AI-industry hype, argues the underlying contract amounts to “a grotesque attempt by both Oracle and OpenAI to mislead investors and the markets at large.” Andrew Freedman, an analyst at Hedgeye Risk Management, is more measured, saying “there’s a lot of concern whether or not demand comes through in the same way.” Skeptics have flagged a concentrated financial risk in a single, unproven customer since the contract was first announced.

Oracle has also built in a cushion against that concentration. The prepaid and customer-supplied hardware portions of its large AI contracts now total $75 billion, according to the company’s own release, which Oracle says lowers the capital it must raise itself to build the data centers those contracts require.

How Did Oracle’s Backlog Get This Big?

Oracle’s backlog did not appear overnight. It climbed for a full fiscal year, quarter after quarter, as AI companies signed cloud contracts faster than Oracle could build data centers to fill them. Here is how the number moved from under $500 billion to $638 billion across four reporting periods.

1. September 2025: Fiscal first-quarter RPO reaches $455 billion, up 356% from a year earlier, months after Oracle signs a $30 billion-a-year contract with OpenAI.
2. December 2025: Second-quarter RPO climbs to $523 billion, up 438%, with new commitments from Meta and NVIDIA added to the backlog.
3. March 2026: Third-quarter RPO reaches $553 billion, up 325%; Oracle also raises $30 billion in bonds and preferred stock that month, a sale it calls substantially oversubscribed.
4. June 2026: Fourth-quarter RPO hits $638 billion, up 363%, with Bank of America estimating more than half tied to OpenAI alone.

Oracle has tried to widen that customer base beyond the handful of AI labs that built the backlog. In Asia, the company recently launched a new multicloud partner push across Japan and Asia Pacific for its Azure database service. It has also moved into workforce training, signing a deal to train 11,000 UAE students in AI alongside GEMS Education, a bet that enterprise and public-sector AI adoption outlasts any single customer relationship.

Wall Street’s Price Targets Still Point Up

Sell-side analysts didn’t flinch. The morning after earnings, at least nine firms reissued price targets, and most sat well above where the stock was trading.

• Bernstein – Mark Moerdler set a $325 target, the Street’s highest.
• TD Cowen – Derrick Wood set a $300 target.
• Mizuho – reiterated an outperform rating and a $320 target, citing financing clarity.
• Cantor Fitzgerald – Thomas Blakey set a $284 target.
• Barclays – Raimo Lenschow set a $250 target.
• RBC Capital – Rishi Jaluria set the Street’s most conservative target, at $190.

Across 28 analysts tracked over the prior six months, the median target sat at $247.5, according to Quiver Quantitative data. That’s more than 60% above where shares traded in the days after the report.

Not everyone is chasing those targets. Morningstar rates Oracle three stars, meaning fairly valued, with a $207 per share fair value estimate built on a narrow economic moat and Oracle’s heavily leveraged balance sheet.

What Comes Next for Oracle

OpenAI’s own path to paying its side of the contract runs largely through the public markets. One analysis published earlier this year estimated a potential initial public offering, discussed as arriving by the end of 2026 or sometime in 2027, could raise $60 billion to $100 billion or more, based on private funding talks that valued the startup between $500 billion and more than $800 billion.

Oracle is scheduled to report its next quarterly results on September 8, 2026.

Frequently Asked Questions

What Is Remaining Performance Obligations (RPO) in Oracle’s Results?

Remaining performance obligations, or RPO, is the total contracted revenue a company hasn’t yet billed or recognized. For Oracle, the share expected to convert into revenue within 12 months has been rising fast, climbing to 40% of the total in one recent quarter compared with 21% a year earlier, a sign the backlog is starting to turn into cash rather than just growing on paper.

How Much Does Oracle Pay Investors in Dividends?

Oracle’s board declared a quarterly cash dividend of $0.50 per share. The stock traded ex-dividend on July 10, 2026, with payment due July 24, 2026. That works out to a dividend yield of about 1.1%, higher than the roughly 0.7% average across the software industry.

What Happens if OpenAI Can’t Pay Its Oracle Bills?

Oracle has said it could quickly repurpose its AI computing infrastructure for other customers if a client falls behind on payments, limiting the damage from any single account. OpenAI’s own annualized revenue was around $12 billion as of last year, Fortune reported, citing The Information, a fraction of the scale of its long-term commitments to Oracle.

How Much AI Computing Capacity Is Oracle Delivering?

Oracle delivered more than 1.2 gigawatts of data center capacity in fiscal 2026, and co-chief executive Clay Magouyrk told analysts the company aims to bring almost one more gigawatt online in the current quarter alone. Global GPU utilization stood at 97.5% in the fourth quarter, and 92% of GPUs coming off contract were renewed by their original customers, with the remaining 8% finding new customers within 90 days.