Oracle's Debt-Fueled Ascent: A $553 Billion Backlog Meets Mounting Interest Bills

Oracle shares rocketed by roughly 30 percent in a single week, a surge that added nearly $100 billion to the company's market value. This historic rally was ignited by two strategic announcements, yet a closer examination of the financials reveals a company aggressively betting on growth while shouldering a significant debt burden.

Driving the investor enthusiasm was a deepened multicloud partnership with Amazon Web Services. The agreement will link Oracle Cloud Infrastructure (OCI) directly to AWS via private, high-speed connections, with no data transfer fees on Oracle's side. The link, slated to go live in the AWS US East (North Virginia) region in 2026, allows enterprise customers to run applications seamlessly across both platforms. The news alone sent Oracle's stock soaring more than five percent on the day of the announcement.

The cloud giant is also moving to secure the enormous power required for its artificial intelligence ambitions. Just days before the AWS news, Oracle signed a deal with Bloom Energy for up to 2.8 gigawatts of fuel cell capacity, with 1.2 gigawatts already firmly contracted for U.S. data centers. This push for decentralized power aims to sidestep potential grid constraints that could delay the expansion of data centers needed for power-hungry AI workloads.

Should investors sell immediately? Or is it worth buying Oracle?

Oracle's latest quarterly results provided fundamental support for the stock's move. Revenue climbed 22 percent to $17.2 billion, surpassing analyst forecasts. The cloud infrastructure segment was particularly strong, growing 44 percent to $8.9 billion. The most staggering figure, however, was the explosion in remaining performance obligations (RPO), which surged 325 percent to $553 billion. This massive backlog, driven by large-scale AI contracts, includes deals like the one with automotive supplier DENSO to standardize its global supply chain on Oracle Fusion Cloud Applications.

Financing this breakneck expansion comes at a steep cost. Oracle is targeting capital expenditures of $50 billion for fiscal 2026, primarily for revenue-generating data center equipment. This spending is largely funded by debt, with long-term liabilities standing at approximately $124.7 billion. Interest expense in the last quarter jumped 32 percent year-over-year to $1.18 billion. The company's free cash flow has been deeply negative at minus $24.7 billion over the past four quarters.

The stock closed the recent week at 150.42 euros, trading about 16 percent above its 50-day moving average. However, it remains nearly 47 percent below its 52-week high of 280.70 euros. The recent surge originated from a technically oversold position, as indicated by a Relative Strength Index reading of 27. With institutional investors divided on the strategy and a workforce restructuring plan affecting around 30,000 roles, Oracle's ability to profitably execute its $553 billion backlog without further inflating its debt will be scrutinized in upcoming quarterly reports, the next of which is expected in June.

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