Oracle's Record Cloud Backlog of $553 Billion Fails to Calm Fears Over $50 Billion AI Spend

Oracle's Q4 earnings test balance between explosive cloud growth and $50B AI spending plan, with stock down 9% and analysts split.

Oracle heads into its most closely watched earnings release in years carrying a stunning contradiction. The software giant’s remaining performance obligations have surged 325% year over year to $553 billion, fueled by insatiable demand for cloud infrastructure to train and run artificial intelligence models. Yet that avalanche of future revenue has done little to soothe investors rattled by the company’s own ambition: a $50 billion capital expenditure plan for fiscal 2026 that has already pushed free cash flow into negative territory.

The tension erupted on Friday, when Oracle shares plunged 9% to €185.38 in European trading — a single-day rout that erased billions in market value. The selloff came on the heels of a strong US jobs report, which reinforced expectations that interest rates will stay higher for longer, a headwind for richly valued growth stocks. But the deeper source of anxiety is Oracle’s massive AI buildout. Analysts warn the spending on data centers and graphics processors is straining a balance sheet already carrying elevated debt relative to sector peers. The options market is bracing for more turbulence: traders have priced in a roughly 12% swing in either direction after the June 10 earnings release, with unusually high put volume signaling hedging activity.

Wall Street is split on how to judge the trade-off between explosive growth and financial discipline. UBS analyst Karl Keirstead raised his price target to $285 with a buy rating after customer and partner checks revealed “no signs of waning demand.” Scotia’s Patrick Colville lifted his target to $290 and maintained an outperform call, though he acknowledged near-term volatility. Mizuho reiterated its outperform rating and a $320 target, while Guggenheim kept an aggressive $400 target and a buy recommendation. On the other side, RBC Capital increased its target to $190 but stuck with a “sector perform” rating, attributing the revision solely to expanded peer multiples rather than fundamental conviction. The Canadian bank had downgraded the stock to a hold earlier in June, explicitly citing overvaluation, balance-sheet pressure, and negative free cash flow even as Oracle’s AI backlog swelled.

The numbers due after Wednesday’s close will test whether the optimists or the skeptics have the stronger case. For the fourth quarter of fiscal 2026, the consensus calls for earnings per share of $1.95 — a 15% year-over-year gain — and revenue of roughly $19.1 billion, up from $15.9 billion a year earlier. Oracle itself guided in March for non-GAAP EPS between $1.96 and $2.00 and cloud revenue growth of 46% to 50%. Cloud infrastructure, which expanded 84% to $4.9 billion last quarter, remains the fulcrum. The critical question is whether Oracle can deliver on its $553 billion backlog without sacrificing margins — or piling more debt onto the balance sheet.

Valuation adds to the stakes. The stock trades at a forward price-to-earnings ratio roughly 23% above the sector average and at a price-to-sales multiple that is 180% higher than peers. Despite Friday’s battering, Oracle shares are still up about 11% year to date, leaving them 34% below the all-time high reached last September. The June 10 report will determine whether that premium — and the aggressive AI bet that supports it — remains justified.