Oracle’s AI Ambitions: Can a Surging Order Book Revive Its Shares?

Oracle US68389X1054

Oracle's stock has faced significant pressure in recent months, trading more than 33% below its 52-week high. As the company prepares to release its quarterly results this Tuesday, December 10, investor attention is intensely focused on one specific metric: its backlog of contractual commitments. Market observers are questioning whether massive agreements with firms like OpenAI could signal a turning point for the equity.

Despite its recent pullback to a closing price of €186.90, Oracle continues to command a premium valuation. Its price-to-sales (P/S) multiple stands at approximately 8, a figure that towers over the sector average of 3.4. This premium indicates the market has already priced in substantial future growth.

This optimism, however, is tempered by growing investor caution over execution risks. Building out the vast data center infrastructure required for artificial intelligence (AI) demands enormous capital expenditure (CapEx). Reflecting this delicate balance, Citigroup analysts recently trimmed their price target on the stock while maintaining a "Buy" rating. They characterize the situation as a tightrope walk between explosive revenue potential and the financial realities of rapid infrastructure scaling.

The Engine of Growth: A Skyrocketing Contract Backlog

The core narrative propelling Oracle is its aggressive push into AI infrastructure. Last quarter, the software giant stunned markets by reporting a 359% surge in its Remaining Performance Obligations (RPO) to $455 billion, driven by enormous cloud capacity contracts.

Expectations for the upcoming report are even higher. Analysts at Citigroup project the backlog could have ballooned to as much as $600 billion. This bullish forecast leans heavily on a reported $300 billion cloud partnership with OpenAI, coupled with sustained strong demand from other industry titans including Meta and Nvidia.

Wall Street's Watchlist: Beyond the Headline Numbers

Consensus estimates on Wall Street anticipate second-quarter earnings per share of around $1.63, which would represent an increase of nearly 11%. Revenue is projected to reach approximately $16.15 billion.

Yet, management's forward-looking commentary is likely to carry more weight than these headline figures. Investors are keen for specific details on the timeline for converting the colossal order backlog into recognized revenue. The construction schedule for the OpenAI infrastructure deal is a particular point of focus. Heightened activity in the options market, with over two million open contracts, suggests major players are positioning for potentially significant volatility following Tuesday evening's earnings release.