Oracle Stock Is Down 58% From Its Peak -- but Revenue Is Still Growing by Double Digits. Time to Buy?

It is not often that a $400 billion company loses well over half its value while its sales and profits are still climbing. Oracle (NYSE: ORCL) has managed exactly that. The stock trades around $144, down 58% from the $345.72 record it set last September, yet the business behind it just wrapped up the best year in its history: fiscal 2026 revenue rose 17% to about $67.4 billion, and net income climbed 37% to about $17 billion.

So what broke? And with the shares this far off their highs, is the crash a buying opportunity?

A business still growing fast

Nothing in Oracle's latest results looks like a company in trouble. In its fiscal fourth quarter (the period ended May 31, 2026), revenue rose 21% year over year to $19.2 billion. Total cloud revenue grew 47% to $9.9 billion, and the piece investors care about most -- Oracle Cloud Infrastructure, its rented computing power for artificial intelligence (AI) workloads -- jumped 93% to $5.8 billion. That was an acceleration from the already-rapid growth the cloud business posted earlier in the year.

Image source: Getty Images.

The backlog is where it becomes almost hard to believe. Oracle's remaining performance obligations, the contracted revenue it hasn't recognized yet, reached $638 billion at year-end. That is up 363% from a year earlier, and up $85 billion in a single quarter, reflecting a wave of enormous AI-capacity deals with a handful of very large customers.

One caveat about a backlog this size is how few customers it leans on. Much of the recent surge came from a handful of giant AI deals, in which customers either prepaid Oracle for its chip purchases or supplied the chips themselves. That concentration cuts both ways: it delivers eye-popping growth, but it also ties Oracle's fortunes to whether a small group of big spenders keeps writing checks.

The demand, in other words, is unmistakable. The question is what it costs to serve.

The reason for the fear

The problem the market keeps circling back to is cost. Building all that capacity is staggeringly expensive, and Oracle is borrowing to do it. Capital expenditures ran to about $55.7 billion in fiscal 2026, and the company raised about $43 billion in debt over the year, with more financing on the way. A business that once threw off cash is now spending far more than it takes in, which pushed free cash flow deeply negative as management races to pour concrete and install chips ahead of demand.

That is what the sinking stock is weighing.

Every dollar of that $638 billion backlog assumes Oracle can finance the build-out, fill the data centers, and convert those contracts into profitable revenue on schedule -- and most of that backlog converts over many years, not the next few quarters. If demand for AI computing softens, or the returns on all that spending disappoint, the debt stays put while the payoff shrinks and slips further out.

Time to buy?

After a 58% drop, a good deal of that risk is arguably priced in now. Oracle trades at about 25 times earnings and about 17 times the earnings expected over the coming year -- a modest valuation for a company still growing its top line at a double-digit rate and its cloud-computing business far faster.

But a cheaper stock is not automatically a buy.

The bull case is straightforward: If Oracle grows into that colossal backlog, today's price will look like a gift. But the bear case is just as clear: A debt-heavy, capital-hungry build-out leaves management little room for a misstep, and the stock has spent much of the past month showing how fast sentiment can turn. Between those outcomes sits a company whose fortunes now hinge less on selling software than on financing and filling data centers -- a very different, and riskier, Oracle than the one investors owned a few years ago.

Overall, the stock's price today finally reflects serious skepticism. So, for investors who believe the AI-cloud boom endures, a starter position could make sense. But given the leverage and the breakneck pace of spending, I'd want to see Oracle turn more of that backlog into cash before adding to it. Personally, I'm inclined to start slow and let the results, not the discount, make the case.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.