Oracle Stock Faces a Reality Check as AI Buildout Costs Cloud the $553 Billion Backlog

Oracle's $39.2B infrastructure spend flips free cash flow negative, overshadowing a $553B order backlog and bullish analyst targets, as shares slip ahead of Q4 earnings.

Oracle’s transition from software giant to landlord of AI data centers has produced a staggering $553 billion order backlog — but the price tag for that transformation is giving investors pause. The shares, which have rallied roughly 25% year-to-date according to one tally and 17% by another measure, slipped on Wednesday as concerns over rising capital expenditure overshadowed a flurry of bullish analyst notes.

The numbers behind Oracle’s infrastructure push are eye-popping. Over the first nine months of its fiscal 2026, the company poured $39.2 billion into data center buildouts, up from just over $12 billion in the same period a year earlier. That spending spree has flipped free cash flow deeply negative, a dynamic that unnerved some traders even as the order backlog surged 325% year-on-year to $553 billion.

Wall Street, however, remains largely unruffled. Mizuho raised its price target to $320, citing insatiable demand for AI compute capacity. UBS analyst Karl Keirstead followed suit, lifting his target from $250 to $285 after positive customer checks. Scotiabank’s Patrick Colville went a step further, boosting his target to $290 and noting that Oracle’s cloud infrastructure expansion appears to be running ahead of schedule. Of the 42 analysts covering the stock, 32 now recommend buying. The lone dissenting voice comes from Morgan Stanley, which trimmed its target to $207 and warned of excessive customer concentration.

Yet the market’s reaction tells a different story. The stock slid as much as 6% in Wednesday’s session, paring gains from a blistering weekly rally. While profit-taking played a role, a broader fear has crept in: that the industry’s capex race could eventually dilute shareholders. The trigger was a separate report that Alphabet plans to sell billions in stock to fund its own AI infrastructure, stoking concerns across the sector that other companies may follow suit.

One clear beneficiary of Oracle’s ascent is co-founder Larry Ellison. His personal fortune has swelled to $302 billion, catapulting him to third place on the global rich list — a remarkable leap from below $200 billion as recently as April.

All eyes now turn to June 10, when Oracle reports fiscal fourth-quarter results. The Street expects earnings per share of $1.95 on revenue of roughly $19.1 billion. Cloud infrastructure, the company’s primary growth engine, posted a blistering 84% revenue increase last quarter, and Mizuho forecasts overall revenue growth of 17% for the quarter, with that rate set to double next year.

The options market is bracing for a post-earnings swing of about 12%, a threshold Oracle has historically tended to surpass. The stock currently trades around €196.20, still roughly 30% below its 52-week high of €281. The arithmetic is simple: if management can deliver convincing numbers and a credible path to profitability, that high-water mark could come back into play. If not, the tension between a colossal backlog and a crushing expenditure cycle will only intensify.