Oracle shares have lost more than half their value in a year, closing at $141.40 on October 9, down 51.75% over twelve months. Yet one investor is doubling down, and the numbers behind that bet deserve a hard look from anyone who believes in betting against the crowd.
The contrarian case comes down to a single figure: $664 billion in signed customer contracts, known as remaining performance obligations, up $209 billion year over year. Oracle 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 revenue over the next 36 months.
Why Is Oracle Stock Falling While Its Backlog Grows?
The selloff followed a report on OpenAI's revenue that dragged down AI stocks broadly, and observers now describe an AI credit scare hitting Oracle. The bears point to real problems. Free cash flow came in at negative $5.40 billion as capital expenditures surged 235.2% to $28.50 billion. Interest expense jumped 55% to $1.4 billion, and a $20 billion equity issuance diluted existing shareholders. Management expects $90 billion to $95 billion in capex this fiscal year.
As the hosts of 24/7 Wall St.'s The AI Investor Podcast put it, debt is leverage and leverage causes volatility. A one-year drawdown past 50% proves the point.
Oracle's Growth Numbers Beat Microsoft and Amazon
Here is where the free market does its work. Oracle grew revenue 29.6% last quarter and trades at a forward P/E of 18. Microsoft carries a forward P/E of 25 with quarterly revenue growth of 17.7%. Amazon trades at 24 with growth of 19.6% and pays no dividend.
Oracle pays $0.50 per quarter, a 1.48% yield, and has paid quarterly dividends since 2009. First quarter adjusted EPS of $1.92 beat the $1.74 consensus. Management guides fiscal 2027 to at least $90 billion in revenue and $8.10 in non-GAAP EPS.
The Cloud Engine Is Running
Cloud infrastructure revenue rose 121% to $7.39 billion, and cloud now makes up 60% of revenue, up from 48% a year ago. GPU utilization hit 97.9%, and older GPUs up for renewal commanded a 20% premium, a direct answer to worries about AI hardware losing value. Multicloud database revenue grew 353% across 70 regions, turning rival clouds into distribution partners. Q2 guidance calls for cloud revenue growth of 65% to 71%.
Operating cash flow rose 183.82% to $23.10 billion, and cash stands at $36.37 billion. CFO Hilary Maxson said scaled projects deliver a free cash flow conversion ratio of roughly 100% of post-tax EBITDA. Barron's also reported an Oracle insider buying stock amid the OpenAI swings.
The thesis is simple American arithmetic: the backlog is signed, the GPUs are full, and the dividend keeps coming while $664 billion turns into revenue. Whether the market keeps punishing the stock is another question. Individual investors deciding for themselves, without a government safety net, is exactly how this system is supposed to work.
FAQ
How much has Oracle stock fallen?
Oracle closed at $141.40 on October 9, down 51.75% over the past year and 26.49% year to date.
What is Oracle's remaining performance obligation?
Oracle's signed backlog stands at $664 billion, up $209 billion year over year, with more than $30 billion in new AI contracts booked in the first quarter alone.
Why is Oracle's free cash flow negative?
Free cash flow was negative $5.40 billion because capital expenditures rose 235.2% to $28.50 billion as Oracle builds out AI data centers. Operating cash flow, however, rose 184% to $23.10 billion.