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Oracle has the kind of AI backlog most software companies would envy, but Wall Street is no longer rewarding backlog alone.
ORCL is under pressure as investors are also focusing on customer concentration, required capital spending and the timeline for converting Oracle’s backlog into cash flow.
That is why Oracle’s record $638 billion in remaining performance obligations has become less of a victory lap and more of a stress test for its AI cloud story.
Oracle has the AI backlog bulls wanted
The bullish case is still easy to see as Oracle’s fiscal fourth-quarter revenue rose 21% to $19.2 billion, while total cloud revenue climbed 47% to $9.9 billion.
Oracle Cloud Infrastructure revenue jumped 93% to $5.8 billion, showing that demand for its AI cloud capacity is not theoretical.
The backlog number was even more dramatic.
Oracle said remaining performance obligations, or contracted revenue not yet recognised, rose by $85 billion sequentially to $638 billion, up 363% from a year earlier.
The company also said much of the recent RPO increase came from large AI contracts where customers either prepaid for GPUs or supplied hardware themselves, reducing some of Oracle’s capital burden.
But the market is focused on the other side of that same equation.
Jacob Bourne, analyst at eMarketer, told Reuters that “the demand is real” as cloud infrastructure revenue and backlog grow fast.
His warning was that the funding question is getting harder as capital expenditure comes in above estimates and free cash flow remains negative.
OpenAI exposure is now the uncomfortable question
The biggest concern is not that Oracle lacks demand, but that the demand may be too concentrated.
Bank of America analysts have estimated that more than half of Oracle’s $638 billion RPO is tied to OpenAI.
That makes the backlog look less like a fully diversified cloud order book and more like a large bet on one customer’s ability to keep funding aggressive AI expansion.
That does not automatically make the exposure bad.
OpenAI is one of the most important AI companies in the world, and a deep relationship with it gives Oracle a seat at the centre of the infrastructure buildout.
The issue is scale, as if a large share of Oracle’s future growth depends on a customer that is still spending heavily and relying on outside capital, investors will naturally ask how bankable those commitments are.
That is why RPO has become such a contested number.
The Wall Street Journal noted that signing a 12-figure contract is one thing, but collecting on it is another.
MarketWatch also framed the key debate around whether Oracle can convert its AI backlog into recognised revenue, citing Jefferies analyst Brent Thill’s focus on backlog conversion after the latest earnings report.
Wall Street still likes Oracle, but fears cost of growth
Oracle’s selloff has not killed the bull case. The stock recently snapped a nine-day losing streak, but was still down 56.2% from its September 2025 all-time high.
As per market data, 84% of analysts rate Oracle a Buy, the highest approval level since 2011, with an average target of $254.84.
Mizuho’s Siti Panigrahi still sees Oracle as a long-term AI winner, with a $320 target, though financing and debt remain part of the concern.
The bears also have a clear argument as Oracle expects fiscal 2027 capital expenditure of up to $95 billion, above the $67.7 billion analysts expected, and plans to raise nearly $40 billion through debt and equity financing.
CFO Hilary Maxson said $70 billion of the spending would be Oracle’s own, with another $20 billion to $25 billion expected to be repaid by customers.
Wedbush’s Dan Ives captured the market’s discomfort in a note cited by Sherwood, saying that adding more debt is “not a move the Street wants to see.”
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