Oracle's Backlog Now Sits at $553 Billion. Is the Stock a Buy?

It’s been a brutal start to 2026 for Oracle (ORCL 1.26%) investors. Down about 23% year to date and sitting near $149 per share just before its fiscal third-quarter earnings report, the tech stock had taken a massive beating. And its pullback from its 52-week high is even bigger.

The company’s narrative has been dominated by two opposing forces. On one hand, Oracle boasts a massive backlog driven by unprecedented demand for artificial intelligence (AI) computing. On the other hand, the company faces a staggering $50 billion in expected capital expenditures in fiscal 2026 to build out the data centers required to begin delivering on its contracts.

So, is this apparent headwind of massive spending actually a problem if it’s funding explosive growth, or should investors stay on the sidelines?

Following the company’s strong fiscal third-quarter update on Tuesday afternoon, let’s take a closer look at the business to see if shares are a buy.

Image source: Getty Images.

Accelerating cloud infrastructure growth

Oracle’s third-quarter results showed the company executing. The tech company’s fiscal third-quarter revenue rose 22% year over year to $17.2 billion.

And this momentum is expected to persist. Management raised its fiscal 2027 revenue guidance to $90 billion.

This top-line performance represents a notable milestone for the legacy database giant. As Oracle chief financial officer Doug Kehring explained in the company’s earnings call, the period marked “the first quarter in over 15 years where both organic total revenue and organic non-GAAP [earnings per share] grew at 20% or better…”

Driving this success, of course, is Oracle’s cloud infrastructure business. The company’s cloud infrastructure revenue surged 84% year over year to $4.89 billion during the quarter – a sharp acceleration from the segment’s 68% growth rate in fiscal Q2.

Fueling this growth is an enormous pipeline of contracted demand. Oracle’s remaining performance obligations (RPO), a metric that represents the value of contracts signed but not yet recognized as revenue, climbed to $553 billion. This key metric is up an incredible 325% year over year and up $29 billion sequentially. The sequential increase, management said, was driven by large-scale AI contracts.

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NYSE: ORCL

Oracle

Today’s Change

(-1.26%) $-1.91

Current Price

$149.65

Key Data Points

Market Cap

$436B

Day’s Range

$148.49 - $154.13

52wk Range

$118.86 - $345.72

Volume

2.1M

Avg Vol

29M

Gross Margin

65.40%

Dividend Yield

1.32%

Weighing the spending against the valuation

With shares trading at about 28 times earnings as of this writing, investors clearly expect the company to continue growing rapidly. Of course, its backlog makes predicting continued strong growth quite easy.

Still, execution will be the hard part. Over time, Oracle must seamlessly convert its more than half-a-trillion-dollar backlog into recognized revenue while managing an incredibly capital-intensive expansion.

Management guided for $50 billion in capital expenditures in fiscal 2026. While necessary to secure market share in the AI race, this massive investment cycle is severely pressuring free cash flow. And these upfront costs will increasingly show up as depreciation, weighing on the company’s operating margin.

To fund this build-out, Oracle ended the recent period with about $39 billion in cash and marketable securities on its balance sheet. This cash hoard, alongside the company’s $23.5 billion in trailing-12-month operating cash flow, gives it significant financial firepower, but the scale of the required data center investments remains daunting.

Ultimately, Oracle stock arguably looks attractive today given its reasonable valuation relative to its astounding backlog and accelerating infrastructure growth.

But the fast-changing nature of the AI hardware landscape and the sheer size of the company’s capital commitments mean this investment carries significant uncertainty. Investors interested in the stock, therefore, should view it as high risk, and those who do buy shares may want to consider keeping positions relatively small as a percentage of their overall portfolio.