Oracle's Backlog Grew 4x In A Year. The Stock Fell 37%. Something Doesn't Add Up

Filip Hubaček
Filip Hubaček
Growth & Value Investor •

Oracle (ORCL) reported a 4x surge in contract backlog to $550 billion, yet shares remain down 37% from their peak. While AI spending weighs on current cash flow, these signed contracts provide unprecedented revenue visibility.

Oracle (ORCL) just had one of the strangest years in tech. Its Remaining Performance Obligations (= signed contracts not yet booked as revenue) went from roughly $130 billion to over $550 billion in a single year. That's a 4x increase. And the stock is still down significantly from its highs.

Something doesn't add up. Or does it?

image.png


The number everyone's ignoring

RPO isn't a forecast or a sales pipeline. Its contracts customers have already signed. Oracle now has years of highly visible future revenue locked in and most of the recent growth is tied to large-scale AI infrastructure deals.


Why the stock hasn't caught up

Free cash flow is negative, and that scares people. But it's negative for a specific reason: Oracle is spending roughly $70 billion this year building AI data centers to fulfill that exact backlog. That's not reckless spending, it's capacity being built against demand that's already contracted.



The fundamentals, unfiltered:

  • Revenue at record highs

  • Net income growing on higher-margin cloud services

  • Oracle Cloud Infrastructure (OCI) is one of the fastest-growing segments in the entire company

  • AI contracts with major customers extend revenue visibility years out


The valuation question

Oracle trades around 25–26x forward earnings. Not cheap. But if the backlog converts the way management expects, today's price may look conservative in hindsight rather than expensive.

image.png


What the chart says

Price is sitting right back on a long-term rising trendline that's held as support multiple times since 2024, right at a heavy Volume Profile Node, a zone with a lot of historical trading activity. Hold this zone, and it's an interesting spot for long-term entries. Lose it, and the door opens for further downside.


The part people miss

Oracle also cut about 21,000 jobs, 13% of its workforce over the past 12 months. Management tied part of this directly to AI-driven automation. Read together with the CapEx numbers, this isn't just cost-cutting. It's capital being reallocated from operating expenses into infrastructure.


Bottom line

If this backlog converts the way management is guiding, today's spending could be looked back on the way Amazon (AMZN)'s early cloud buildout is viewed now: expensive and controversial at the time, foundational in hindsight.

Disclosure:

I hold a long position in ORCL.

STOCKS IN THIS ARTICLE

ORCL
Track all markets on TradingView

Comments

Back to all articles