Oracle’s stock has been battered in recent weeks, but the story is more nuanced than a simple sell-off. The software giant is sitting on a record $638 billion in contractual commitments — a staggering 363% jump from last year and even enough to overtake Microsoft’s backlog. Yet investors are fleeing, not cheering. The disconnect stems from one brutal reality: most of those future revenues are locked in long-term contracts that won’t deliver cash for years, while the company is bleeding nearly $24 billion in free cash flow today to build the infrastructure needed to fulfill them.
The shares closed at €122.42 on Thursday, down 2.5% on the day and 42% over the past month. That extends a slide that has now wiped 56% off the 52-week high of roughly €280. Technical indicators flash deeply oversold — the relative strength index sits at 26 — but the downtrend remains firmly intact.
At the heart of the sell-off lies the sheer cost of Oracle’s pivot into an AI infrastructure powerhouse. Through its partnership in the “Stargate” project with OpenAI, SoftBank, and MGX, the company is committing tens of billions to new data centers. After spending nearly $56 billion in fiscal 2026, management has outlined an even more aggressive investment budget for the coming year. Official guidance pegs capital expenditure at around $70 billion for fiscal 2027 — a $15 billion increase — though internal planning documents reportedly float a figure as high as $100 billion.
That spending is already tearing a hole in the balance sheet. Free cash flow swung to negative $23.69 billion, and long-term debt has breached the $100 billion mark. To bridge the gap, Oracle plans to raise $40 billion through a mix of new loans and equity issuance. The market has reacted with skepticism, punishing the stock despite the company’s defense that the spending is backed by an ironclad backlog of customer orders.
Should investors sell immediately? Or is it worth buying Oracle?
The catch is just how little of that backlog hits the income statement in the near term. According to Oracle’s 10-K filing, only about 12% of the $638 billion in contractual obligations is expected to convert into revenue in the next fiscal year. The remainder stretches years into the future, leaving the company exposed to risks such as customers failing to renew, construction delays, and power shortages that could stall new data center operations.
Analysts remain surprisingly calm, with an average price target of €220 — implying more than 80% upside from current levels. They see the payoff arriving after 2027, when the new facilities begin generating profits. At a forward price-to-earnings ratio of 18 based on earnings estimates, the stock looks cheap relative to some cloud peers. But the key question is whether Oracle can survive the cash crunch long enough to reach that promised land.
The broader industry is also under scrutiny. Major cloud providers are expected to invest over $700 billion in AI infrastructure in 2026 alone, and doubts are mounting about whether those sums will generate sustainable returns. For Oracle, the bet is existential: the entire future of a company valued at €368 billion now rides on completing one of the largest infrastructure projects in economic history without a financial mishap. Every delay in construction or hiccup in the supply chain would instantly amplify the financial strain — and the market is pricing that risk into every share.
Ad
Oracle Stock: Buy or Sell?! New Oracle Analysis from July 3 delivers the answer:
The latest Oracle figures speak for themselves: Urgent action needed for Oracle investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from July 3.
Oracle: Buy or sell? Read more here...
