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Oracles $638 Billion AI Data-Center Backlog Raises Investor Caution
Oracle Corporation stunned investors with record fiscal‑year 2026 results announced on June 10, 2026. The company posted $19.2 billion in total revenue for the fourth quarter, with Oracle Cloud Infrastructure (OCI) contributing $5.8 billion—a 93 % year‑over‑year jump that underscores the surging demand for AI‑driven compute.
The most striking metric was the remaining performance obligations (RPO), which surged 363 % to $638 billion. Oracle explained that RPO represents the value of signed contracts that have not yet been delivered, offering a snapshot of future revenue potential.
Oracle’s data‑center strategy hinges on speed and cost efficiency. The firm prioritises automation, enabling new centers to be commissioned faster than rivals that rely on human‑centric management. Proprietary remote direct memory access (RDMA) networking moves data between graphics processing units (GPUs) more quickly than traditional Ethernet, a technical edge that has attracted high‑profile AI customers such as OpenAI, Meta Platforms and Elon Musk’s xAI.
The OpenAI partnership is a key driver of the RPO surge. A September 2025 report by The Wall Street Journal noted that roughly $300 billion of Oracle’s RPO is attributable to OpenAI alone. OpenAI, which raised $122 billion in March 2025, reports annualized revenue of about $25 billion and continues to post losses, leaving uncertainty about how it will meet its large commitment to Oracle.
Oracle’s management outlined conversion expectations for the RPO. The company said it expects to convert 12 % of its RPO into revenue over the next 12 months, and a further 34 % in the following 24 months. Less than half of the $638 billion could become actual revenue over the next three years—a long window in an industry that moves quickly.
Financial risk is another concern. Oracle carries $122 billion in long‑term debt and recently announced plans to raise an additional $40 billion through a mix of debt and equity to fund new AI data‑center construction. The company’s free cash flow for fiscal 2026 was negative $23.7 billion, reflecting heavy investment in its cloud infrastructure.
In market terms, Oracle’s stock has fallen 44 % from its all‑time high, and its market capitalization is now just below the $1 trillion threshold that it approached in late 2025. Oracle’s price‑to‑earnings ratio of 31.6 is slightly below the Nasdaq‑100 average of 34.6, suggesting the stock may be near fair value relative to peers. Analysts forecast earnings growth of 7.7 % for fiscal 2027 and 45.7 % for fiscal 2028, but the latter projection is based on the assumption that the large RPO will convert into revenue.
Investor sentiment remains cautious. The Motley Fool’s Stock Advisor list of the 10 best stocks for 2026 does not include Oracle, and the company’s recent performance has not yet convinced some market observers. Oracle’s management maintains that its AI data‑center business is a long‑term growth engine, but the combination of a large RPO, uncertain customer fulfillment, and significant debt raises questions about the speed and reliability of future revenue streams.
Oracle’s push into AI infrastructure demonstrates clear demand from leading AI developers, but the company’s ability to translate its massive order backlog into cash flow will be a key factor for investors in the coming quarters. The next earnings release, scheduled for September 2026, will provide further insight into how much of the $638 billion RPO is converting into realized revenue and whether Oracle’s debt‑raising plans are proceeding as expected.
The most striking metric was the remaining performance obligations (RPO), which surged 363 % to $638 billion. Oracle explained that RPO represents the value of signed contracts that have not yet been delivered, offering a snapshot of future revenue potential.
Oracle’s data‑center strategy hinges on speed and cost efficiency. The firm prioritises automation, enabling new centers to be commissioned faster than rivals that rely on human‑centric management. Proprietary remote direct memory access (RDMA) networking moves data between graphics processing units (GPUs) more quickly than traditional Ethernet, a technical edge that has attracted high‑profile AI customers such as OpenAI, Meta Platforms and Elon Musk’s xAI.
The OpenAI partnership is a key driver of the RPO surge. A September 2025 report by The Wall Street Journal noted that roughly $300 billion of Oracle’s RPO is attributable to OpenAI alone. OpenAI, which raised $122 billion in March 2025, reports annualized revenue of about $25 billion and continues to post losses, leaving uncertainty about how it will meet its large commitment to Oracle.
Oracle’s management outlined conversion expectations for the RPO. The company said it expects to convert 12 % of its RPO into revenue over the next 12 months, and a further 34 % in the following 24 months. Less than half of the $638 billion could become actual revenue over the next three years—a long window in an industry that moves quickly.
Financial risk is another concern. Oracle carries $122 billion in long‑term debt and recently announced plans to raise an additional $40 billion through a mix of debt and equity to fund new AI data‑center construction. The company’s free cash flow for fiscal 2026 was negative $23.7 billion, reflecting heavy investment in its cloud infrastructure.
In market terms, Oracle’s stock has fallen 44 % from its all‑time high, and its market capitalization is now just below the $1 trillion threshold that it approached in late 2025. Oracle’s price‑to‑earnings ratio of 31.6 is slightly below the Nasdaq‑100 average of 34.6, suggesting the stock may be near fair value relative to peers. Analysts forecast earnings growth of 7.7 % for fiscal 2027 and 45.7 % for fiscal 2028, but the latter projection is based on the assumption that the large RPO will convert into revenue.
Investor sentiment remains cautious. The Motley Fool’s Stock Advisor list of the 10 best stocks for 2026 does not include Oracle, and the company’s recent performance has not yet convinced some market observers. Oracle’s management maintains that its AI data‑center business is a long‑term growth engine, but the combination of a large RPO, uncertain customer fulfillment, and significant debt raises questions about the speed and reliability of future revenue streams.
Oracle’s push into AI infrastructure demonstrates clear demand from leading AI developers, but the company’s ability to translate its massive order backlog into cash flow will be a key factor for investors in the coming quarters. The next earnings release, scheduled for September 2026, will provide further insight into how much of the $638 billion RPO is converting into realized revenue and whether Oracle’s debt‑raising plans are proceeding as expected.
