Oracle's Two-Speed Reality: Soaring Cloud Backlog Meets a Squeezed Balance Sheet

Oracle posts record $638B backlog and 77% cloud growth, but shares slump, layoffs loom, and S&P downgrades debt to BBB-.

The numbers coming out of Oracle these days tell two completely different stories. One is about a company riding the AI wave with a record $638 billion in contracted future revenue. The other is about a business shedding thousands of employees while its credit rating hovers just one notch above junk status.

For investors, the gap between those narratives has become the defining question.

On the operational side, the momentum is hard to argue with. Cloud infrastructure revenue jumped 77 percent in the latest quarter, while net income climbed 95 percent to $6.13 billion. The backlog of Remaining Performance Obligations — revenue already locked in by contract — hit an all-time high of $638 billion, fueled largely by massive infrastructure deals with Meta and Nvidia. Oracle is also financing its own power-grid upgrades and battery storage for AI data centers, spending heavily today for payoffs expected in the years ahead.

Yet the share price tells a less enthusiastic story. Oracle trades at roughly €122.90, about 58 percent below its 52-week high of €294.85 reached last September. The stock sits 17 percent beneath its 200-day moving average of €148.21, a sign the medium-term downtrend remains intact despite an 11 percent bounce over the past month.

A Workforce Shrinking While Debt Grows

The contrast between Oracle's investment ambitions and its internal cost discipline has become increasingly stark. Insiders report another round of layoffs is being prepared for September 1, the start of the company's second fiscal quarter, with managers already identifying positions to eliminate. That would extend a reduction that has already cut the workforce from 162,000 to 141,000 employees — roughly 21,000 jobs.

Meanwhile, the company is pouring $55.7 billion into infrastructure while taking on $43 billion in new debt. That aggressive leverage has not gone unnoticed. S&P downgraded Oracle to BBB- in July, just one step above speculative grade. Credit default swaps on Oracle bonds now trade above 200 basis points, reflecting heightened risk perception in credit markets.

Oracle is part of a cohort — together with Alphabet, Amazon, Meta and Microsoft — responsible for the bulk of roughly $570 billion in AI-related debt issuance globally this year. Those five companies account for about 20 percent of the S&P 500's weighting.

Regulation as a Tailwind

There's a strategic pivot underway that could eventually shift the calculus. For two decades, Oracle was synonymous with closed systems — once you entered its database world, leaving was difficult. That approach has been reversed over the past two years. The company now integrates its database technology directly into the data centers of former rivals: Amazon Web Services, Microsoft Azure and Google Cloud are all partners.

The rationale is straightforward. Enterprises want to combine cloud services rather than commit to a single provider. Running Oracle Database 23ai on third-party infrastructure cuts latency and avoids expensive egress fees, while allowing direct access to AI tools like Google Gemini or Azure OpenAI.

Regulation is reinforcing this shift. The EU AI Act entered its full enforcement phase this summer, and the Digital Operational Resilience Act has become a key procurement criterion for many firms. Oracle has expanded its EU Sovereign Cloud with dedicated legal entities and local staff in Europe, offering banks and hospitals a direct route to generative AI while keeping data and governance within their jurisdiction.

Security Patches and Market Pressure

A separate issue has been generating discussion in IT circles: Oracle's August security update, released mid-month, contained 943 patches addressing 925 vulnerabilities across 23 product families. Most concerning is a flaw in Oracle Internet Directory rated at the maximum severity of 10.0, exploitable without authentication. Several WebLogic vulnerabilities also approach the top of the scale, and more than 460 of the flaws can be exploited remotely without credentials.

The broader market environment hasn't been forgiving either. On Thursday, technology stocks led broad selling while the yield on 30-year US Treasuries hit a 19-year high. Rising rates make refinancing debt-funded growth strategies more expensive — a particular vulnerability for a company with Oracle's leverage.

A Chart Showing Early Stabilization

Technical indicators suggest the selling pressure may be easing. After hitting a 52-week low of €100.76 in late July, the stock has recovered about 10 percent. The Relative Strength Index sits at a neutral 47.4, neither overbought nor oversold.

Analysts remain constructive over the longer term, with an average price target of $246.43 — implying roughly 73 percent upside from current levels.

The central tension for Oracle is whether the record backlog can be converted into sustained margin expansion. The company is spending heavily on infrastructure today, borrowing aggressively to fund it, and trimming headcount to manage costs — all while the market waits to see if the AI buildout translates into the profitability the stock once promised. The layoffs announced for the coming quarter will likely keep that debate front and center in the weeks ahead.