Oracle shares have lost more than half their value in a year, yet the company sits on a $664 billion contract backlog and cloud revenue that grew 121% last quarter. That tension, between booming AI demand and mounting debt-fueled spending, is now one of the defining questions for markets, workers, and anyone worried about where the AI money is actually going.
The stock closed at $141.40 on October 9, down 51.75% over the past year and 26.49% year to date, after a report on OpenAI's revenue set off what observers describe as an AI credit scare. Some contrarian investors, including analysts at 24/7 Wall St., are buying anyway. Whether they are early or in denial matters far beyond one ticker symbol.
Why is Oracle's stock falling while its backlog grows?
Oracle's remaining performance obligations, essentially signed contracts not yet billed, hit $664 billion, up $209 billion year over year. The company booked more than $30 billion in new AI contracts in the first quarter alone, and management expects roughly half of that backlog to convert into sales within 36 months.
The revenue is arriving. Cloud infrastructure revenue rose 121% to $7.39 billion, and cloud now makes up 60% of total revenue, up from 48% a year ago. GPU utilization stands at 97.9%, and aging GPUs up for renewal resold at a 20% premium, easing fears that AI hardware loses value overnight.
So why the sell-off? Because the bill for all this growth is enormous. Free cash flow came in at negative $5.40 billion as capital expenditures surged 235.2% to $28.50 billion. Management expects $90 billion to $95 billion in capex this fiscal year. Interest expense jumped 55% to $1.4 billion, and a $20 billion equity issuance diluted existing shareholders. As the hosts of 24/7 Wall St.'s The AI Investor Podcast put it,