Oracle's $638 Billion Promise Faces Its First Real Test: Can the Balance Sheet Keep Up?

Oracle's record $638B backlog clashes with a 58% stock drop and Michael Burry's short bet, as AI concentration and depreciation concerns mount.

The gap between what Oracle says it will deliver and what its share price is currently telling investors has rarely been wider. The company closed its fiscal 2026 with a record $638 billion in remaining performance obligations — a 363 percent surge from a year earlier — yet its stock sits roughly 58 percent below the September high of €294.85, when it touched that peak on the 10th of that month. The current price of €121.88 reflects a market that is no longer taking the AI narrative at face value.

That skepticism has a name, and it belongs to one of the most famous contrarians in modern investing. Michael Burry has disclosed a short position against Oracle, initially opened at $144.63 and added to at $152.00. His central accusation: the company is overstating earnings by 26 to 27 percent because it depreciates AI graphics processors too slowly. If that thesis holds, the projected earnings per share of $8.05 for fiscal 2027 is softer than it appears — and the planned $40 billion capital raise, split between debt and equity with a $20 billion share placement, would be stacking leverage onto a less solid profit base than the headline numbers suggest.

The Bull Case: A Backlog That Keeps Growing

For optimists, the sheer scale of the order book is the story. Those contracts are not hypothetical — they are signed commitments, and the pipeline of AI-related work continues to expand. The company's partnership with Amazon Web Services was extended in early August, making Oracle AI Database@AWS available across 22 regions. Oracle has also outlined plans to integrate Quantinuum's "Helios" quantum computer into a U.S. data center, and added new features to its Clinical AI Agent for Oracle Health.

The analyst community remains split but notably not bearish. UBS trimmed its price target from $285 to $245 on August 6, citing the capital intensity of the infrastructure buildout, but kept its buy rating. Guggenheim went further the same day, reaffirming a $400 price target after management discussions. 24/7 Wall St. weighed in on August 11 with a buy recommendation and a $212.31 target, pointing to the backlog and 93 percent year-over-year growth in cloud infrastructure.

Institutional money is also flowing in. Principle Wealth Partners and Commerzbank have both added Oracle positions recently, suggesting that not every capital allocator shares Burry's caution.

The Bear Case: Concentration, Delays, and Cost Pressures

The risks, however, are not confined to the depreciation question. A substantial portion of that $638 billion backlog is tied to a single customer: OpenAI. That concentration leaves Oracle exposed if the AI lab's demand or financial health were to shift. Analysts have flagged this dependency as a structural vulnerability that no amount of contract diversification has yet resolved.

Operational cracks are also appearing. The "Project Jupiter" data center in New Mexico — a $165 billion AI facility — is facing delays. The natural gas pipeline needed to power it has hit regulatory hurdles, pushing completion from the original timeline to February 2027, roughly six months behind schedule. For a company selling capacity to customers, delivery delays are not a footnote; they are the product.

Meanwhile, media reports citing internal documents describe another round of layoffs planned for September, with some teams facing double-digit percentage cuts. This follows a fiscal 2026 in which Oracle already reduced its workforce by approximately 21,000 people, or about 13 percent of staff. The optics of raising $40 billion while trimming headcount are difficult to reconcile with the growth narrative the company is presenting publicly.

The Market's Verdict So Far

The share price has been reflecting this tension in real time. Between August 12 and 17, the stock lost roughly 7 percent in after-hours trading after first-quarter revenue guidance of 27 to 29 percent growth fell short of inflated investor expectations. On Tuesday, the stock dropped 2.7 percent to close at €123.30, pressured by the pipeline delay news. The weekly decline stands at 7.0 percent, and the stock is down 26 percent year-to-date. Over twelve months, the loss reaches 39 percent — though a 16 percent gain in the 30-day window and an annualized volatility of 63 percent show just how violently the price can swing in either direction.

September 1: A Double Turning Point

The coming weeks will test whether Oracle can convert its backlog into billed revenue at a pace that justifies the balance-sheet expansion. The company has confirmed its fiscal 2027 revenue target of $90 billion and raised its earnings guidance to $8.05 per share. The next earnings report arrives on September 11, with consensus expecting around $19.13 billion in revenue for the first quarter.

But September 1 carries a dual significance: it marks both the start of Oracle's second fiscal quarter and the reported internal deadline for the planned job cuts. How the company communicates around those two events — whether it leads with growth or addresses its cost structure head-on — will signal which story management believes is the more credible one. The backlog supports the bull case. The debt load, the customer concentration, and the construction delays argue for caution. Oracle has built one of the largest order books in corporate history. The question now is whether it can build the earnings to match.