Oracle’s AI Ambitions Fuel Record Backlog Amid Stock Market Skepticism

Oracle US68389X1054

Oracle Corporation finds itself at the center of a compelling market contradiction. While its share price has plunged more than 40% from its September peak, the software giant is simultaneously reporting an explosion in its future contract backlog. This divergence highlights a stark conflict between the company's demonstrable growth in artificial intelligence and investor concerns over its ability to execute on massive new commitments.

The most striking data point comes from Oracle's fiscal second quarter for 2026. The company's remaining performance obligations (RPO), a critical metric representing contracted future revenue, surged by an astonishing 438% to reach $523 billion. This figure underscores a monumental pipeline of business, overwhelmingly driven by soaring demand for cloud and AI infrastructure services.

Other key financial results from the quarter include:
* Total Revenue: $16.1 billion (a 14% year-over-year increase)
* Cloud Services Revenue: $8.0 billion (up 34%)
* Non-GAAP Earnings Per Share: $2.26 (a 54% gain)

Despite these robust fundamentals, market sentiment remains negative. The stock, trading around €163, continues to languish below its 50-day and 200-day moving averages.

OpenAI Speculation Triggers Sell-Off

The primary catalyst for the recent downward pressure on the stock was market speculation concerning potential delays in major data center projects for OpenAI. Reports suggested that the completion of this crucial infrastructure—and the associated revenue recognition—could be pushed from 2027 to 2028, spooking investors and accelerating the sell-off.

Oracle's management moved swiftly to address these rumors, issuing a firm denial. The company stated unequivocally that there are no delays at the locations necessary to meet its contractual obligations. While this clarification helped temper the decline, a palpable sense of skepticism persists among market participants.

Leadership Transition Adds to Uncertainty

Compounding the operational concerns is a significant strategic shift in the company's leadership. The departure of Safra Catz in September has introduced questions about whether the new co-leadership can manage a planned $50 billion capital expenditure program with the same efficiency as the prior executive team. This uncertainty is weighing on investor confidence.

The mixed signals have created a clear divide among Wall Street analysts. Goldman Sachs reduced its price target, highlighting the concentration risk posed by Oracle's heavy reliance on its partnership with OpenAI. In contrast, Bank of America reaffirmed its buy rating, arguing that the colossal backlog signals long-term competitive dominance and that the market sell-off is an overreaction.

The gulf between Oracle's stock performance and its contractual future has rarely been wider. If management can convincingly dispel doubts surrounding its AI infrastructure timelines, the record backlog could trigger a significant re-rating of the shares. However, should evidence of genuine delays emerge, the market is likely to demand a higher risk premium, potentially leading to further valuation adjustment.