Oracle's backlog has increased by $209 billion over the last year.
Oracle's backlog has increased by $209 billion over the last year.
Investors have good reason to be concerned about Oracle (ORCL -4.64%) stock. The company has borrowed heavily to finance its transformation into an artificial intelligence (AI) cloud stock. Moreover, much of its backlog depends on OpenAI, a company that has not performed to expectations financially.
Despite that concern, investors may take comfort in the company's considerable backlog. Even if OpenAI does not perform to expectations, that backlog could still drive Oracle's growth story, and here's how.
The state of Oracle today
Indeed, Oracle's growth story is likely hiding in the company's $664 billion backlog.
To serve its customers, Oracle has accumulated more than $125 billion in debt to finance the infrastructure needed to meet the demand for its AI cloud services. Since Oracle has a book value of around $67 billion, that debt places significant strain on the company's balance sheet, sparking concern that it could derail its AI cloud ambitions.
Furthermore, yields on some of its corporate bonds have risen above 8%. While that does not compare to the 15% bond yields of a neocloud company like CoreWeave, it has sparked investor concern.
Additionally, nearly half of that is the $300 billion deal it made with OpenAI. Investors have become increasingly skeptical about whether it can afford to honor its agreement with Oracle.
But Oracle has a tremendous backlog without OpenAI. That backlog grew by $209 billion over the previous 12 months, approximately two-thirds the size of its OpenAI deal. Such improvements increase the likelihood that it can monetize its AI investments with or without OpenAI.
Investors can also take comfort in the fact that its revenue for the first quarter of fiscal 2027 (ended Aug. 31) was over $19 billion. That was 30% higher than the year-ago level, and nearly all of that growth came from its cloud segment.
Averytin News Financial update.