Oracle (NYSE: ORCL) has experienced one of the more unusual market situations in recent memory, with its stock trading around $144 against a record high of $345.72 set last September.
The 58% decline has come despite the company posting what management described as the best year in Oracle’s history, with fiscal 2026 revenue rising 17% to approximately $67.4 billion.
Net income climbed 37% to roughly $17 billion over the same period, making the stock’s collapse all the more striking to analysts watching the company’s fundamentals.
The company’s fiscal fourth quarter, covering the period ended May 31, 2026, showed no signs of deterioration, with revenue rising 21% year over year to $19.2 billion.
Total cloud revenue jumped 47% to $9.9 billion in that quarter, while Oracle Cloud Infrastructure, the division handling AI computing workloads, surged 93% to $5.8 billion.
Perhaps the most jaw-dropping figure in Oracle’s latest results is its remaining performance obligations, which represent contracted revenue not yet recognized, reaching $638 billion at year-end.
That backlog figure is up 363% from a year earlier and grew by $85 billion in a single quarter alone, driven by a wave of massive AI-capacity deals with a small number of very large customers.
The concentration of that backlog among a handful of clients represents a meaningful risk that the market has not chosen to overlook.
Capital expenditures reached approximately $55.7 billion in fiscal 2026, and Oracle raised roughly $43 billion in new debt over the year to fund the aggressive build-out of data center capacity.
A company that once generated reliable free cash flow is now spending far more than it collects, pushing free cash flow deeply negative as management races to install infrastructure ahead of demand.
Every dollar of that $638 billion backlog assumes Oracle can finance the construction, fill those data centers, and convert contracted commitments into profitable revenue on schedule, with most of that work unfolding over many years.
If demand for AI computing softens or returns on capital spending disappoint, Oracle’s debt obligations remain firmly in place even as the timeline for payoffs extends further into the future.
At current prices, the stock’s valuation reflects genuine skepticism rather than the pure enthusiasm that drove shares to their record high last year.
For investors who believe the AI cloud boom has staying power, a cautious starter position could represent a reasonable entry point given the historic decline from peak prices.
The more prudent approach, however, is to watch Oracle convert more of that extraordinary backlog into actual cash before committing further capital, allowing results rather than the discount alone to justify the investment case.
