Oracle's $638 Billion AI Backlog Comes With a $122 Billion Debt Hangover

Oracle's $638B backlog, fueled by $300B OpenAI deal, masks $122B debt and $23.7B cash deficit; stock falls 56% as investors flee.

Oracle’s order books have never looked fuller – or more dangerous. The software giant is sitting on a backlog of $638 billion, an amount that swelled 363% year-on-year and now overshadows the company’s market capitalisation by a factor of 1.5. Yet investors are fleeing, sending the stock down 2.16% on Wednesday to €121.26 in Frankfurt and wiping out more than a third of its value over the past month alone. The reason: a mounting pile of debt and a cash flow that has swung deeply negative.

Long-term borrowings already exceed $122 billion, and Oracle has raised $43 billion in new debt over the last fiscal year. Now management is preparing to tap the capital markets for an additional $40 billion in the 2027 fiscal year, a financing package that rating agencies are watching closely. The cost of that borrowing is rising: the company’s credit risk has hit a three-year high, and bond markets are growing sceptical about the pace of lending to artificial intelligence projects. The aggressive expansion is primarily funded through leverage, not operational cash.

The cash flow picture explains the urgency. Oracle posted a free cash flow deficit of $23.7 billion in the most recent fiscal year, driven by extraordinary capital expenditure on AI infrastructure. The company plans to spend $70 billion this year alone, with a further $95 billion earmarked for fiscal 2027. Much of that outlay is tied to a single customer: OpenAI, whose $300 billion contract accounts for nearly half the backlog. Oracle acts as the primary landlord for OpenAI’s AI training, but the company’s own filings warn of concentration risk, noting that only 12% of the backlog is expected to convert into near-term revenue. The upfront costs are enormous, and the payoff remains years away.

On the stock market, the damage is severe. Oracle shares now trade just above their 52-week low, having fallen 56.72% from the record high of €280.70. The relative strength index sits at 27.8, a level that typically signals oversold conditions. Yet the selling pressure persists, amplified by a 1.2% decline in the Nasdaq on Tuesday and a broader reassessment of cloud and AI valuations. Over the past twelve months, Oracle’s stock has lost 27.26%.

A small consolation for shareholders is the dividend. Oracle maintained its payout at $2.00 per share for fiscal 2026, distributed in quarterly instalments, signalling that management is not prepared to cut investors off entirely even as it prioritises infrastructure buildout. Analysts remain divided: the average price target is still a lofty €220.15, and Piper Sandler recommends overweight, betting that the cloud infrastructure will eventually generate the high margins needed to justify the debt. But that thesis is being tested daily as the gap between a golden future and a cash-hungry present grows wider.

Meanwhile, Oracle is pushing into new markets. The Kenyan government is in talks to partner with the company for sovereign cloud services, part of a broader push to digitise public administration in East Africa. The deal would add to the backlog but also to the capital requirements. For now, the market’s verdict is clear: every new contract comes with a price tag that Oracle must borrow to pay.