Oracle Earnings Test AI Bet as Backlog Hits $638 Billion

Oracle reports fiscal first-quarter earnings today, and the stock has already been on a wild ride getting here. Shares cratered more than 50% from last year's highs before clawing back double digits over the past month alone.

The swing tells you everything about how divided Wall Street is on this name. Oracle has become one of the most argued-about stocks in the AI infrastructure trade, and today's report is supposed to settle at least part of the debate.

Oracle closed its prior quarter with remaining performance obligations, essentially its contracted-but-unbilled backlog, of $638 billion, up 363% year-over-year. Cloud infrastructure revenue grew 93%, and the company signed $67 billion in new AI infrastructure deals in that quarter alone, according to 24/7 Wall St's breakdown of the numbers.

That backlog is the whole bull case in one number. Multicloud database revenue grew 404% last quarter, and GPU utilization across Oracle's cloud sat at 97.5%, leaving little spare capacity sitting idle. Management has guided to a 31% revenue compound annual growth rate and 28% EPS growth through fiscal 2028.

Oracle closed its fiscal fourth quarter with $638 billion in remaining performance obligations, up 363% year-over-year, while free cash flow ran negative $23.7 billion.

That second number is the bear case, and it's not small. Oracle burned through $23.7 billion in free cash flow last fiscal year on $55.7 billion of capital spending, and next year's capex guide comes in near $70 billion. Some of that is getting funded through a $20 billion stock issuance plus more borrowing.

Ahead of today's print, Morgan Stanley's Keith Weiss nudged his price target on ORCL up to $210 from $207, but kept the rating at Equal-Weight rather than turning outright bullish. He flagged what he called an attractive near-term setup while still waiting for Oracle to prove out the execution behind all that spending.

That's a notably more conservative number than 24/7 Wall St's own $219.26 target, which implies nearly 35% upside from Oracle's last close of $162.52 and comes with a 90% confidence buy call. The spread between those two numbers, plus a Scotiabank cut to $215 from $241 earlier this week, shows just how unsettled the analyst community is right now.

For investors sizing up ORCL today, the trade comes down to which number you trust more: the backlog or the cash burn. If Oracle's RPO keeps converting to revenue on schedule and OCI capacity ramps toward the $144 billion by fiscal 2030 that management has promised, the stock has real room to run toward the $300-plus levels some bulls are floating.

The risk sits in execution and financing. Software license revenue actually fell 6% last quarter, a reminder that Oracle's legacy business is fading while it bets the balance sheet on AI infrastructure. If OpenAI or other anchor customers pull back demand, or if borrowing costs rise faster than expected, that capex load gets a lot heavier to carry.

Compare Oracle's forward price-to-earnings ratio of about 21 to Microsoft's 27 or Amazon's 36, and the valuation argument for ORCL still looks reasonable even after the recent bounce. Oracle's cloud infrastructure growth of 93% also outpaces AWS's 37% and roughly matches Azure's 43%, at least on a smaller revenue base.

Watch today's print for two things specifically: whether RPO growth holds anywhere near that 363% pace, and what management says about free cash flow trajectory into fiscal 2027. A beat on both would likely validate the bull case fast. A miss on either, especially cash flow, could reopen the selloff that took the stock below $135 earlier this year.

Bottom line: Oracle's earnings today aren't just a quarterly check-in, they're a referendum on whether the AI infrastructure spending spree pays off before the balance sheet strain becomes a real problem.