Oracle’s $638 Billion AI Backlog Now Carries a $40 Billion Bill

Oracle’s Q4 2026 earnings report landed on Wednesday with a $638 billion backlog of contracted future revenue, a 93% jump in cloud infrastructure sales, and a guidance call that sent the stock down 10% in extended trading. The same report that confirmed AI demand is real also laid out the bill: around $70 billion in capital spending next fiscal year and approximately $40 billion in new debt and equity to pay for it. The capex and the raise went out the same evening as the earnings beat.

Oracle reported fourth-quarter revenue of $19.2 billion, up 21% year over year, beating the $19.10 billion analysts had pencilled in. Adjusted earnings per share came in at $2.11, ahead of the $1.96 estimate, or $2.03 excluding a one-time investment gain. The cloud-infrastructure unit, the part of the business that rents out raw computing power to train and run AI models, hit $5.8 billion in revenue, up 93%. Most of the new bookings, the company said, were large AI contracts in which customers prepay for the GPUs or supply them directly, and the total of those prepaid and customer-supplied hardware portions now sits at $75 billion.

The Quarter That Confirmed The AI Demand

Oracle’s Q4 FY2026 print, released June 10 after the bell, was the strongest of its fiscal year and one of the strongest in the company’s history. Total revenue of $19.18 billion beat the $19.10 billion estimate, and the $2.11 non-GAAP earnings per share landed above the $1.96 consensus, both of which the company laid out in the record fourth-quarter and full-year results.

The cloud-infrastructure (IaaS) business, Oracle’s most direct line into AI training and inferencing workloads, grew 93% year over year to $5.8 billion. Total cloud revenue, which combines IaaS with cloud applications, rose 47% to $9.91 billion, while cloud applications (SaaS) on their own grew 10% to $4.1 billion. Software revenue, the legacy on-premise business, fell 2% to $6.82 billion, continuing a multi-year shift as customers move to subscriptions. The Oracle Multicloud AI Database, which lets customers run Oracle’s database inside other clouds, grew 404% in the quarter, a pace Oracle called the fastest it has ever posted for any business line.

The headline reads as a clean beat across the board. The capex plan is the rest of the report. The numbers below show the bill.

• Q4 FY26 revenue: $19.2 billion (up 21%)
• Q4 non-GAAP EPS: $2.11 (estimate: $1.96)
• Cloud Infrastructure (IaaS): $5.8 billion (up 93%)
• Total cloud revenue: $9.91 billion (up 47%)
• Multicloud AI Database growth: up 404%

The Backlog Wall Street Has To Price

Oracle’s remaining performance obligations, the contracted but not-yet-recognized revenue that shows up as a backlog line, finished the quarter at $638 billion, up 363% year over year and $85 billion higher than the $553 billion it reported three months earlier, according to the same RPO line item on the company statement. Four customers each signed contracts worth more than $8 billion during the quarter.

Most of the new RPO was AI, and most of the AI RPO came with the hardware already paid for. Oracle’s own statement says most of the RPO increase in both Q3 and Q4 came from large-scale AI contracts in which the customer prepaid Oracle for the GPUs or the customer bought and supplied the GPUs to Oracle. The total of those prepaid and customer-supplied hardware portions across Oracle’s large AI contracts now sits at $75 billion, the company said. It is the reason the capital Oracle must raise to build out its AI data centers is lower than the headline backlog would suggest.

Only 12% of the $638 billion is expected to convert to recognized revenue in the next 12 months, and another 34% between 13 and 36 months, which is roughly a decade of forward revenue weighted heavily toward the back end. The mix has the same effect as a long-dated bond: a large notional number that does not all show up on the income statement at once. Bank of America analysts, in a note cited by CNBC, said more than 50% of the remaining performance obligation comes from OpenAI.

The Stargate project with OpenAI and SoftBank now spans sites in Texas, Wisconsin, Michigan, and New Mexico, with nearly seven gigawatts of planned capacity and over $400 billion in projected investment, per the capex and Stargate breakdown. At the flagship Abilene, Texas campus, Oracle has delivered 42% of capacity and says another 35% will come online over the next three months.

Almost one gigawatt of computing power is set to come online in the current quarter, roughly the total Oracle brought up across all of fiscal 2026, co-CEO Clay Magouyrk said on the conference call. Software revenue, the part of Oracle that used to define the company, fell 2% in the quarter to $6.82 billion, the third consecutive quarterly decline as customers keep migrating to cloud subscriptions. The RPO line is now Oracle’s most-watched figure.

The $70 Billion Capital Spending Bill

Oracle spent $55.7 billion on capital expenditures in fiscal 2026, up 162% year over year and above the company’s own $50 billion guidance, according to the detailed Q4 line items in the CNBC report. The company now expects to spend around $70 billion in net capex in fiscal 2027, with the total reaching $90 billion to $95 billion once customer prepayments of $20 billion to $25 billion are included.

Fiscal 2026 free cash flow came in at negative $23.7 billion. Operating cash flow of $32 billion, up 54% for the year, was consumed by the capex bill. Depreciation nearly doubled to $7.62 billion. Oracle raised $43 billion in debt and $5 billion in equity during the same fiscal year. The depreciation step-up alone signals how quickly the asset base is growing, with hardware capitalized last year now generating revenue but also being written down faster than the income statement is collecting cash.

For fiscal 2027, Oracle plans to raise approximately $40 billion through a combination of debt and equity financing, including a previously announced $20 billion at-the-market equity issuance, per the FY27 capital plan language in the press release. Oracle does not expect to issue additional debt in calendar year 2026, the statement said. Total Oracle debt outstanding sits at roughly $117 billion, the largest non-financial issuer in the Bloomberg US high-grade corporate bond index.

• FY26 capex (actual): $55.7 billion
• FY27 net capex (guide): around $70 billion
• FY27 total capex including prepayments: $90 billion to $95 billion
• FY27 financing target: approximately $40 billion
• Of which: $20 billion at-the-market equity issuance
• FY26 baseline already raised: $43 billion debt + $5 billion equity

What The New Financing Does To The Risk Profile

Oracle’s fiscal 2026 non-GAAP operating income hit a record $28.9 billion, up 16% in USD, on a fiscal-year revenue base of $67.4 billion, up 17%. Cloud revenue at $34.0 billion was up 39% for the year. Software revenue, the part of the business that used to be the bulk of operating profit, was down 1% to $24.5 billion. Operating cash flow of $32 billion was a record, up 54%. The numbers on the income statement still look like a software vendor’s; the cash flow statement now looks like a utility financing a generation of new power plants.

The mix shift is what drove the after-hours sell-off. Oracle cut up to 30,000 employees starting in March, approximately 18% of the global workforce, the largest restructuring in the company’s history, with $1.8 billion in fiscal 2026 restructuring charges, a figure roughly five times the prior year, fitting the same pattern as the wider layoff wave across AI infrastructure. New chief financial officer Hilary Maxson, who joined in the quarter from Schneider Electric, used her first earnings call, per the full Q4 earnings call transcript, to set a credit-quality guardrail around the spending.

We will remain focused on disciplined capital allocation, maintaining a strong balance sheet, and preserving our investment-grade credit rating.

Hilary Maxson, chief financial officer of Oracle, on the Q4 FY2026 earnings call, June 10, 2026.

The OpenAI Concentration Behind The Numbers

More than 50% of Oracle’s $638 billion backlog sits with a single counterparty, OpenAI, according to Bank of America analysts cited by CNBC. The same analysts rate the stock a Buy, and the call underscores how concentrated the bull case has become.

Oracle’s Abilene, Texas site is the visible test of whether the OpenAI bet pays off. The flagship Stargate campus has delivered 42% of capacity and another 35% is set to come online in the next three months, per the call. Co-CEO Clay Magouyrk called progress at the OpenAI sites ‘significant.’ The site sits inside a broader Stargate footprint that now spans Texas, Wisconsin, Michigan, and New Mexico, with nearly seven gigawatts of planned capacity and more than $400 billion in projected investment across the network.

OpenAI’s market position is itself in motion. Anthropic, the Claude maker, overtook OpenAI on paper in May after a $65 billion Series H round that valued it at $965 billion post-money. Oracle is not exposed to that valuation race, but it is exposed to the question of whether OpenAI’s appetite for compute keeps growing at the pace that the $638 billion of RPO assumes it will, even as Anthropic overtakes OpenAI on valuation in the private market.

For fiscal 2027, Oracle confirmed its prior revenue guidance of $90 billion total revenue and raised its non-GAAP EPS guide to $8.05, growth of 18% after adjusting for one-time events from fiscal 2026. For the first quarter of fiscal 2027, Oracle called for $1.72 to $1.76 in adjusted EPS on revenue growth of 27% to 29%, both inside the prior range of estimates. The guide, in line with analyst expectations, is the part of the report that didn’t move the stock. What moved it was the spending that delivers on the guide. The first order of business for fiscal 2027, the breakdown of the FY27 guide shows, is the cash and the balance sheet that fund the next gigawatt.