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

Core Viewpoint - Oracle is experiencing a challenging start to 2026, with shares down approximately 23% year to date, trading near $149 per share, and facing significant capital expenditure pressures while also benefiting from strong demand for AI computing [1][2][11]. Financial Performance - Oracle's fiscal third-quarter revenue increased by 22% year over year, reaching $17.2 billion, with management raising fiscal 2027 revenue guidance to $90 billion [5][12]. - The company achieved a milestone with both organic total revenue and organic non-GAAP earnings per share growing at 20% or better for the first time in over 15 years [6]. Cloud Infrastructure Growth - The cloud infrastructure segment saw revenue surge by 84% year over year to $4.89 billion, accelerating from a 68% growth rate in the previous quarter [6]. - Oracle's remaining performance obligations (RPO) rose to $553 billion, reflecting a 325% year-over-year increase, driven by large-scale AI contracts [7]. Capital Expenditures and Financial Position - Oracle is expected to incur $50 billion in capital expenditures in fiscal 2026 to expand its data centers, which is essential for maintaining market share in the AI sector [11]. - The company ended the recent period with approximately $39 billion in cash and marketable securities, alongside $23.5 billion in trailing-12-month operating cash flow, providing significant financial resources for its expansion [12]. Valuation and Market Expectations - Shares are trading at about 28 times earnings, indicating that investors anticipate continued rapid growth, supported by a substantial backlog [9][10]. - Despite the attractive valuation relative to its backlog and growth, the capital-intensive nature of the business and the fast-evolving AI landscape introduce significant uncertainty [12].