Oracle Corporation (NYSE: ORCL) shares are showing signs of a rebound in premarket trading on Monday, climbing roughly 2.6% after a sharp nine-session decline that erased 24% of the stock's value. The tech giant closed at $140.27 on Friday, near its 52-week low of $134.57, and well off the high of $345.72.
The recent selloff comes despite a massive $638 billion in remaining performance obligations (RPO), which is about 1.56 times the company's current market capitalization of $408.5 billion. This backlog, driven by AI infrastructure contracts, surged $85 billion in the fourth quarter, a 363% year-over-year increase. However, the disconnect between Oracle's order book and its stock price highlights investor concerns about the company's cash flow and spending.
In fiscal 2026, Oracle reported negative free cash flow of $23.7 billion, largely due to heavy capital expenditures on cloud infrastructure. The company plans to raise approximately $40 billion in fiscal 2027 through debt and equity, including an earlier $20 billion at-the-market equity sale. CFO Hilary Maxson warned that gross margins will "step down" in fiscal 2027 as more data-center projects come online.
CEO Clay Magouyrk emphasized the scale of demand, noting that Oracle booked $67 billion in AI infrastructure contracts in the quarter, with customer prepayments and bring-your-own-hardware deals totaling $75 billion. He described the AI infrastructure market as a "trillions of dollars per year" opportunity. The company's fiscal first-quarter delivery is approaching one gigawatt, nearly matching the capacity delivered over the past four quarters combined.
Despite the negative cash flow, analysts remain optimistic. Google Finance lists 28 buy ratings, four holds, and no sells from 32 analysts over the past three months. The average 12-month price target is $263.86, representing an 88.1% upside from Friday's close. Piper Sandler's Billy Fitzsimmons maintained a buy rating with a $225 target as of July 6.
"The demand is real," said eMarketer analyst Jacob Bourne, but he cautioned that "the funding question is getting harder, not easier." Oracle is projecting up to $95 billion in capital spending for fiscal 2027, with $70 billion of that being its own spending and $20 billion to $25 billion reimbursed by customers.
William Blair added Oracle to its Conviction List, contributing to the premarket bounce. The stock's next ex-dividend date is July 10, with a 50-cent quarterly dividend. Investors are now weighing Oracle's debt, equity pressures, and margin outlook against its massive AI cloud contract backlog, which will take time to convert into cash.
