A $638 Billion Backlog, a Downgrade, and a Stock Near Its Low: Oracle's AI Bet Cuts Both Ways
Published on 07/17/2026 at 14:25 | Redaktion boerse-global.de
Oracle’s share price is hovering around €106.44, barely 1.3% above its 52-week trough — a stark contrast to the September 2025 record of €280.70 that now lies 61.65% behind. The stock has surrendered more than a third of its value since the start of 2026, losing 13.63% in the past seven trading sessions alone. Yet beneath the surface sit numbers that would make most software companies envious: a $638 billion backlog of unfulfilled performance obligations and an IaaS revenue stream that grew 84% year-on-year in the fiscal third quarter.
The disconnect stems from a single, brutal reality: building the world’s most ambitious AI infrastructure costs money — and Oracle is borrowing heavily to get there.
Sovereign AI Wins Bring Capital Headaches
On the positive side of the ledger, Oracle continues to notch strategic victories. The company is the reported frontrunner for a highly sensitive Japanese government cloud project, beating out Amazon Web Services and Microsoft. The deal fits neatly into its “Sovereign AI” strategy, which keeps data physically and logically isolated for regulators and defense clients. To back that ambition, Oracle has already committed to invest more than $8 billion in Japanese cloud infrastructure over a decade.
Domestically, the company launched its AI Agent Studio for Fusion Applications on July 14, 2026, a tool that lets developers build agentic applications capable of autonomously running business processes. The logic is clear: the bigger the backlog, the more Oracle needs automated tools to convert those obligations into high-margin software revenue faster.
Should investors sell immediately? Or is it worth buying Oracle?
But the market is paying more attention to the cost side of that equation.
S&P Acts as Debt Tops $167 Billion
By the end of fiscal 2026 on May 31, Oracle’s total debt had climbed to roughly $167.4 billion. Free cash flow for the year turned deeply negative at $23.7 billion, driven almost entirely by the construction of GPU clusters and data centers — including participation in the Stargate joint venture with OpenAI and SoftBank.
The spending plans for fiscal 2027 are even more daunting. Oracle has flagged capital expenditure of up to $95 billion, which after customer repayments would leave a net cash outflow of around $70 billion. Some industry reports put the company’s total data-center expansion plan at $250 billion. To bridge the gap, Oracle intends to raise roughly $40 billion through a mix of debt and equity in the current fiscal year, including a $20 billion stock placement already announced.
Rating agencies have taken notice. On July 9, S&P Global Ratings cut Oracle’s long-term credit rating from BBB to BBB-, one notch above junk, citing “extraordinarily high” AI-related investment, rising component costs, and elevated concentration risk.
One Customer Holds the Keys
That concentration risk is perhaps the most worrying variable. A substantial portion of Oracle’s AI backlog is tied to a single large developer. The client is currently embroiled in legal disputes that raise questions about its ability to honor contractual commitments. If that customer falters, billions in committed revenue could evaporate overnight — a concentration exposure that S&P explicitly flagged during the downgrade.
Oracle at a turning point? This analysis reveals what investors need to know now.
Technical indicators suggest the selloff may have gone too far. The relative strength index has fallen to 25.5, deep in oversold territory, while the stock trades nearly 34% below its 200-day moving average of €162.91. Analysts are split, with price targets spanning a wide range that reflects the market’s disagreement over how to weigh a historic backlog against a balance sheet under siege.
Oracle’s story is a textbook case of how expensive the transformation to an AI infrastructure powerhouse can become — and how quickly investors reprice that journey when doubts about the financing surface. The next few quarters will reveal whether cash flow stabilizes, Japan’s sovereign cloud bet pays off, and the big AI client stays the course. Until then, the stock remains trapped between a $638 billion promise and a near-junk rating.
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