Oracle’s $138B AI Backlog Faces Its Biggest Test Tonight

Oracle Corp. (NYSE: ORCL) reports fiscal Q1 2026 earnings tonight after the close, and this one carries added weight. Once dismissed as a legacy enterprise software giant, Oracle has transformed into a serious contender in cloud infrastructure and a key enabler of the artificial intelligence (AI) buildout. Its Oracle Cloud Infrastructure (OCI) platform has become the company’s growth engine, complemented by multicloud partnerships with Microsoft, Google, and Amazon. With AI workloads surging, Oracle is now considered the “fourth hyperscaler,” behind AWS, Azure, and Google Cloud. The stakes are high: the company is sitting on a massive $138 billion backlog, expected to climb toward $149 billion, and investors want to see if that order book translates into realized revenue.

Expectations are fairly tight heading into the release. Analysts are forecasting earnings per share of $1.47–$1.48 on revenue of roughly $15 billion, representing year-over-year growth of about 6% and 13%, respectively. The company has guided for total revenue growth between 11–13% in constant currency, cloud revenue up 26–30%, and EPS growth between 4–6%. In many ways, the quarter itself is less important than the commentary—especially around backlog conversion, capex intensity, and margins.

The biggest number to watch is RPO, or remaining performance obligations, which stood at $138 billion last quarter, up 41% year-over-year. Jefferies analysts suggest a Q1 bogey of ~69% growth, with some on the Street whispering about an exit trajectory above 100%. In June, Oracle announced a $30 billion annual recurring revenue (ARR) contract—widely linked to OpenAI—that could reshape RPO and capex trends for years to come. Tonight, investors will look for updates on how that megadeal is ramping, and whether Oracle is in position to capture more such contracts. Execution on this backlog will determine whether the company can justify its current premium multiple, with shares trading at ~40x FY26 EPS versus Microsoft at ~30x.

Capital expenditures are another flashpoint. Oracle spent $21.2 billion in FY25 and guided for FY26 capex of more than $25 billion, largely driven by the Stargate AI data center initiative in Texas and new global capacity. Some analysts expect that number could rise toward $30 billion next year and as high as $40 billion in FY27. Investors are willing to tolerate this surge in spending if it translates into durable growth, but margins are already under pressure. Net income and free cash flow will be scrutinized closely; Street consensus sees free cash flow rebounding to ~$1.8 billion from a negative $2.9 billion in FQ4 as capex eases temporarily. BMO and Barclays both flagged that while revenue strength is durable, margin compression remains a key concern.

Other drivers include Oracle’s AI services pipeline, its expanding SaaS portfolio, and the competitive dynamics within cloud infrastructure. OCI revenue has been growing at a 50%+ clip, with Guggenheim projecting a 56.4% year-over-year increase this quarter. That growth compares favorably to AWS (+17%), Azure (+32%), and Google Cloud (+39%) in their most recent results, underscoring Oracle’s ability to gain share in a market long dominated by the big three. At the same time, the company’s SaaS businesses—led by Fusion and NetSuite—continue to expand, though growth is moderating compared to OCI. Analysts will be listening for commentary on Oracle’s database migration strategy, as AI-centric offerings like Oracle 23 AI could reinforce its position in data management.

Looking back at Q4, Oracle delivered $15.9 billion in revenue (+11% y/y) and non-GAAP EPS of $1.70, both above guidance. Cloud revenue rose 27% to $6.7 billion, with IaaS up 52% and SaaS up 12%. OCI consumption revenue jumped 62%, bringing its annualized run rate to nearly $12 billion. Cloud database services rose 31%, and the Autonomous Database grew 47%. Management raised FY26 revenue guidance to at least $67 billion (+16% y/y), projecting cloud infrastructure growth of more than 70% for the year. Remaining performance obligations grew by $8 billion sequentially to $138 billion, with management stating it expects RPO growth of more than 100% in FY26. Capex reached $9.1 billion in Q4 alone, underlining the scale of investment required.

CEO Safra Catz emphasized that Oracle is “still waving off customers” due to supply constraints and that demand continues to outstrip available capacity. CTO Larry Ellison highlighted the company’s AI-ready database platform, arguing Oracle is uniquely positioned to make customer data accessible to large language models while preserving privacy. That strategic positioning has resonated with analysts: Barclays, BMO, Citi, and Bank of America have all raised their price targets in recent weeks, with targets now ranging from $240 to as high as $295. Sentiment is constructive, but valuation is a recurring caution flag.

Heading into tonight’s print, Oracle shares are trading near $238, up 3.3% yesterday and rebounding from last week’s slide to $223. The stock sits just below its 50-day moving average at $237, with technical traders eyeing whether a strong report can power a breakout. The market wants confirmation that Oracle can deliver on its backlog, sustain 50%+ OCI growth, and stabilize margins even as capex soars.

If Oracle hits or exceeds RPO and OCI growth expectations, the stock could rerate higher, with some analysts eyeing $270–$300 over the next 12–18 months. If, however, backlog conversion disappoints or margin pressure intensifies, the premium multiple could come under fire. With investors already nervous about AI froth, tonight’s report is a high-stakes moment.

In short, Oracle has become central to the AI megatrend, sitting at the intersection of data, cloud, and compute. Its backlog is massive, its partnerships are deep, and demand is real. But the key question remains: can Oracle translate those eye-popping commitments into actual revenue and profits? Tonight’s earnings will go a long way toward answering that.