Oracle's $638 Billion Backlog Meets Its Balance Sheet on Thursday

There is no company in technology where the gap between operating momentum and share price is wider than Oracle.

The database giant reports fiscal first-quarter results on Thursday after the close. It arrives carrying a remaining performance obligation of roughly $638 billion — a backlog that grew 363% last year and now dwarfs the company’s entire $67.4 billion of annual revenue.

Cloud infrastructure revenue grew 93% last quarter. Management is guiding to 34% revenue growth this fiscal year. Yet the stock is down 17.7% year to date and roughly 28% over the past twelve months, against a 12.8% gain for the S&P 500.

That disconnect is the entire story, and Thursday is the next referendum on it.

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What Should Oracle Investors Expect?

The Zacks Consensus Estimate calls for earnings of $1.74 per share on revenue of approximately $19.14 billion. That revenue figure implies growth of more than 28%, consistent with management’s guidance for a 27% to 29% increase. Consensus sits comfortably within Oracle’s own EPS guidance range of $1.72 to $1.76.

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The number that will actually move the stock is cloud growth. Management guided first-quarter cloud revenue to expand 58% to 64% year over year. Printing inside that band would validate the thesis that the backlog is converting on schedule. Falling short would raise uncomfortable questions about whether $638 billion of contracted obligations translates into revenue at the pace investors have been promised.

Oracle carries a Zacks Rank #2 (Buy) paired with a positive Earnings ESP (Expected Surprise Prediction) of +1.1%. Our research shows that when a positive Earnings ESP combines with a Zacks Rank of #3 or better, a positive surprise follows about 70% of the time.

The Balance Sheet Is the Story

Here is what should temper any enthusiasm about that setup. Last quarter, Oracle beat consensus earnings by 7.65% and revenue by 0.54%. The stock fell about 9% despite the double-beat report.

Investors are no longer grading Oracle on demand. They are grading it on how demand gets financed.

Looking back at fiscal 2026, free cash flow came in at negative $23.7 billion, a swing from roughly breakeven the prior year, as capital expenditures jumped 162% to $55.7 billion. Operating cash flow actually rose 54% to $32 billion — the business is generating cash — but the build is consuming it faster.

And it only gets heavier from here. New CFO Hilary Maxson has guided fiscal 2027 net cash capex to roughly $70 billion, excluding $20 billion to $25 billion in customer prepayments.

To fund it, Oracle announced plans to raise $40 billion through debt and equity, including a $20 billion share sale — on top of $43 billion of debt and $5 billion of equity raised in fiscal 2026. At recent prices, that equity program implies roughly 4.7% dilution. S&P Global responded by downgrading Oracle’s credit rating to BBB-, one notch above high yield.

The OpenAI Question

The concentration risk deserves a deeper look, because it is the crux of the bear case. Analysts at Bank of America estimate that OpenAI accounts for more than half of Oracle’s $638 billion backlog. S&P cited that concentration explicitly in its downgrade.

OpenAI lost roughly $20.9 billion on an operating basis in 2025, with estimates of another $7 billion in the first quarter of 2026, and its IPO has reportedly slipped to 2027. Oracle expects to convert about 12% of its RPO — roughly $76.6 billion — into revenue during fiscal 2027, with another 34% arriving between months 13 and 36. Those conversion assumptions depend on a counterparty that must keep raising capital to operate.

Reports that some banks declined to participate in Stargate-linked data center financings where Oracle was anchor tenant, citing concentration and credit concerns, suggest the credit market is already pricing this risk.

None of this means the backlog is illusory. It means the backlog is contingent in a way that a traditional enterprise software order book is not, and investors are right to demand a discount for that.

What Makes This Interesting Anyway

The bull case is not complicated: Oracle ORCL already has the demand. At roughly $160 per share against fiscal 2027 EPS guidance of $8.05, the stock trades near 20 times forward earnings — a market multiple for a company guiding to 34% constant-currency revenue growth.

The operating discipline is real, too. Headcount fell to roughly 141,000 from 154,000, and revenue per employee jumped about 35% to $478,000. Management raised its fiscal 2027 EPS guidance to $8.05 even while absorbing this capital intensity, and reaffirmed the $90 billion revenue target.

The spread in Wall Street price targets — roughly $160 to $400 — is among the widest for any large-cap stock, and it reflects a true disagreement: does that RPO represent real, monetizable, near-term revenue, or a long-dated obligation concentrated in a credit-dependent customer? Thursday will move the argument, not settle it.

Bottom Line

Three things matter when the release hits. First, does cloud revenue land inside the guided 58% to 64% band? Second, does management reaffirm the $90 billion revenue and $8.05 EPS targets? Third, and most important, is there any update on capex, financing plans, or RPO composition that changes the cash trajectory?

A Zacks Rank #2 (Buy) and a positive Earnings ESP suggest Oracle will likely clear the earnings bar. But this season has repeatedly demonstrated that clearing the bar and being rewarded for it are separate questions — and nowhere is that gap wider than here.

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This article originally published on Zacks Investment Research (zacks.com).

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