The numbers are staggering. The stock is falling. Oracle delivered a quarter that would be the envy of most technology companies — revenue up 21% to $19.2 billion, cloud revenue surging 47% to $9.9 billion, and a contracted backlog that now stands at $638 billion, nearly ten times annual revenue. The market responded with an 8.5% rout on June 11, wiping out more than $70 billion in market value. The disconnect is not a mystery. It is a math problem.
The Infrastructure Bill Comes Due
Oracle’s cloud infrastructure revenue grew 93% in the fourth quarter. For the full fiscal 2026, total revenue reached $67.4 billion, up 17%, while cloud revenue alone hit $34 billion — a 39% increase. The company is in the midst of a structural transformation, building data centers to service long-term artificial intelligence contracts that are already signed. The issue is that building those data centers costs far more than the cash the business is currently generating.
Operating cash flow hit a record $32 billion, up 54% year over year. But free cash flow was negative $23.7 billion. The gap is entirely capital expenditure: $55.7 billion in fiscal 2026, up 162% from the prior year. And the spending is accelerating. Management has flagged capital expenditures of up to $95 billion for fiscal 2027, with $70 billion of that coming from internal cash outlays. To fund the build-out, Oracle plans to raise $40 billion through a mix of debt and equity — including a $20 billion share issuance that has spooked investors the most.
A Billion-Watt Expansion in a Single Quarter
Chief Financial Officer Hilary Maxson told analysts that Oracle intends to bring nearly one gigawatt of new computing capacity online in the current quarter — equivalent to the entire amount added in all of fiscal 2026. That is a breathtaking pace that requires an equally breathtaking amount of capital. The company has already loaded up on leverage: during fiscal 2026, Oracle added $43 billion in debt and $5 billion in equity. Now it is turning to shareholders again to help foot the bill for the next phase.
The stock has reacted accordingly. At €166.28, Oracle trades 40.8% below its 52-week high but remains 46% above the February trough. Technical indicators reflect a market caught between hope and dread: the share price sits above both its 50-day moving average (€159.71) and 100-day average (€146.23) but still 5.8% below the 200-day average of €176.54. The relative strength index of 46.8 signals neither overbought nor oversold — a market in limbo.
Should investors sell immediately? Or is it worth buying Oracle?
The Backlog That Cuts Both Ways
The $638 billion figure in remaining performance obligations is the trump card for bulls. The backlog grew 363% year over year, driven overwhelmingly by massive AI contracts in which customers prepay or provide their own hardware. An important detail often lost in the noise: $75 billion of that backlog comes from contracts where customers have already paid upfront or supplied equipment, materially reducing Oracle’s capital needs. That nuance may have been overlooked during the sell-off.
Analysts remain largely undeterred. Bernstein raised its price target to $325 from $319 and reiterated an outperform rating, betting on the long-term strategy through 2030. Guggenheim recommended aggressive buying, pointing to a broadening customer base and the capacity build-out as a growth signal. The consensus analyst target sits at $219.94 — a 32% premium to the current price. The gap between that target and today’s level captures the tension: extraordinary operational momentum versus a balance sheet undergoing a real-time stress test.
Not a Solo Act
Oracle is not alone in this capital-intensive sprint. Microsoft reported a 40% growth rate for Azure and plans roughly $190 billion in capital expenditures for calendar 2026. Alphabet’s Google Cloud grew 63% in the first quarter of the year, and the company raised its investment range to $180–190 billion. Every hyperscaler is racing to lock down physical capacity for AI workloads. Oracle is playing the same game from a smaller balance sheet, which makes the leverage more visible but not necessarily more dangerous.
The market wants proof that the infrastructure bet translates into sustained free cash flow. Oracle’s own guidance suggests that proof is still several quarters away. The real question is whether the $638 billion backlog flows through the income statement fast enough to justify the capital being consumed today. That answer will not come in the next earnings report. It will come as the data centers power up and the contracted revenues start converting into cash — a process that is already underway, but at a cost investors are still trying to digest.
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