Oracle's $638 Billion Backlog and Record Cloud Revenue: Why the Stock Is Still Falling

Oracle's cloud revenue now exceeds half of total, but $55.7B capex drove negative free cash flow and 21,000 job cuts, raising investor skepticism.

Oracle closed its fiscal year with a cloud milestone – more than half of total revenue now comes from cloud services – and a backlog of committed future revenue that, at $638 billion, exceeds the company's entire market capitalisation. Yet when the annual report landed on June 23, investors sent shares down nearly 5%. The disconnect between the headline numbers and the underlying cash flow reality has turned Oracle into one of the most polarising bets in technology.

The cloud engine is unquestionably firing. Fourth-quarter revenue hit $19.18 billion, with cloud revenue at a record $9.9 billion – a 47% jump from a year ago. Cloud infrastructure alone surged 93% to $5.8 billion. For the full year, top-line sales climbed 17% to $67.4 billion, an all-time high. But the cost of that growth is staggering. Capital expenditure exploded 162% to $55.7 billion, almost entirely poured into AI data centres and cloud capacity. The result: free cash flow turned negative by $23.7 billion – a jarring figure for a company long admired for its asset-light, high-margin software model.

That cash drain is forcing Oracle to tap capital markets aggressively. In February 2026 it raised $30 billion in new debt. Chief Financial Officer Hilary Maxson now expects net capex of roughly $70 billion in fiscal 2027, to be funded through a further $40 billion in financing – including a $20 billion equity offering already announced. The company’s operating profit of $32 billion demonstrates the core business remains healthy, but the transformation is consuming cash faster than it is generating returns.

At the same time, Oracle is shrinking its workforce. Staff numbers fell from 162,000 to 141,000 over the year – a reduction of 21,000 jobs, or 13% of the global headcount. The restructuring cost $1.84 billion, and management has warned that further cuts may come as it automates internal processes with artificial intelligence. Record growth and mass layoffs occurring in tandem have unnerved investors.

The $638 billion backlog – a 363% increase from roughly $138 billion a year earlier – is the single most striking number in the picture. Yet a large portion of those contracts are concentrated in a small number of very large AI clients, with estimates suggesting more than half tied to OpenAI alone. That concentration risk is the reason the market remains deeply sceptical. If one of those clients hits trouble, the entire build-out wobbles – a scenario investors began pricing in earlier this year when concerns about a major AI customer’s financial strength sent the stock sliding.

Wall Street analysts, however, see opportunity. Jefferies’ Brent Thill reaffirmed his buy rating, calling the current setup attractive given a profitable core and lower AI erosion risk than peers. Bernstein’s Mark Moerdler also issued a buy on June 17. Of 33 analysts covering the stock, 28 rate it a buy, five say hold, and none recommend selling. The consensus price target stands at €221.82 (approximately $263.86), implying upside of more than 52% from the current level of €145.88 (around $175).

That gulf between analyst optimism and market scepticism encapsulates the Oracle trade. The record backlog, the cloud revenue milestones, and the secular AI demand are real. But so is the negative free cash flow, the debt build-up at historic speed, and the dependency on a handful of hyperscale AI clients. Oracle has to prove it can work through that backlog fast enough to stabilise its balance sheet before the leverage starts to bite. Until then, the stock will remain a battleground.