Oracle Craters 11% Despite Monster $523B AI Backlog

• Oracle (ORCL) stock dropped over 11% after Q2 revenue of $16.06B missed the $16.21B estimate, despite 68% growth in OCI to $4.1B and EPS of $2.26 crushing the $1.64 forecast.
• RPO exploded nearly 440% year-over-year to $523B, driven by massive new commitments from Meta (META), Nvidia (NVDA), and others, building on the prior $300B OpenAI deal.
• Investor sell-off highlights mounting worries over Oracle’s ballooning debt, delayed revenue recognition from long-dated AI contracts, and CDS spreads hitting the highest since 2009.

Oracle (ORCL) shares dropped more than 11% in after-hours trading Wednesday, printing as of last check at $198.02, after the company reported fiscal second-quarter revenue of $16.06 billion – up 14% year-over-year but short of the $16.21 billion consensus estimate compiled by Bloomberg. The miss, though modest in absolute terms, amplified existing investor concerns about the sustainability of Oracle’s aggressive AI-driven growth trajectory and its balance-sheet implications.

The core positive in the report remained intact: Oracle Cloud Infrastructure (OCI), the division most directly exposed to generative AI demand, posted $4.1 billion in revenue, a 68% increase that met Street projections. More importantly, remaining performance obligations (RPO) – the company’s preferred forward-looking metric – soared to $523 billion as of November 30, up nearly 440% from the prior year and 15% sequentially. Chief Financial Officer Doug Kehring attributed the surge to major new commitments from Meta Platforms (META), Nvidia (NVDA), and other large customers, signaling that hyperscaler and enterprise demand for GPU-enabled cloud capacity continues unabated.

Adjusted earnings per share of $2.26 easily cleared the $1.64 forecast and marked a clear improvement from $1.47 in the year-ago quarter, underscoring that profitability is not yet under pressure despite massive capital investments.

Yet the market reaction reflects a growing rift between reported bookings momentum and near-term revenue conversion. Oracle’s total RPO now stands at more than three times annual revenue, an extreme ratio even by the standards of high-growth cloud peers. A significant portion of that backlog is tied to long-dated, multi-year infrastructure deals – most notably the widely discussed OpenAI arrangement originally valued in the hundreds of billions – that require Oracle to fund enormous data-center buildouts well ahead of cash collection. The company’s net debt has ballooned accordingly, pushing credit default swap spreads to their widest levels since the global financial crisis, per Intercontinental Exchange (ICE) data.

This leverage dynamic has become the central point of friction for investors. While Oracle shares had rallied sharply into September on the initial disclosure of a $455 billion RPO figure (heavily influenced by the $300 billion OpenAI commitment), the subsequent 30%+ decline reflects mounting skepticism that the company can monetize these contracts quickly enough to service rising interest burdens without diluting shareholders or constraining strategic flexibility.

In essence, Wednesday’s print offered no evidence that the AI infrastructure pipeline is slowing – OCI consumption growth and RPO trends remain among the strongest in the sector – but it also provided no reassurance that Oracle can narrow the gap between explosive bookings and reported revenue fast enough to calm balance-sheet anxieties. Until either conversion accelerates meaningfully or funding costs stabilize, the stock is likely to remain volatile despite underlying demand strength.

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