Down 50% Over the Past Year, Is It Time to Back Up the Truck and Buy Oracle Stock as Revenue Surges?

Oracle (NYSE: ORCL) shares were unable to gather any momentum despite soaring revenue and a robust backlog. The stock is down around 50% over the past year, as investors continue to fret more about the company's capex spending than its growth.

With one of the best growth opportunities in the cloud computing space, let's see if now is the time to go all in on Oracle shares.

AI infrastructure spending fears

At one point last year, investors were celebrating Oracle's push to become a cloud leader, with the stock more than doubling in less than six months. However, that sentiment has done a complete 180-degree turn, with the stock round-tripping its gains.

At this point, the Oracle story largely centers around its cloud infrastructure buildout and associated growth. The company currently has a huge backlog, with $664 billion in remaining performance obligations (RPOs), a metric that measures the remaining value of its already-signed contracts with customers. These are generally non-cancelable contracts for artificial intelligence (AI) data centers it needs to build, and Oracle has turned to innovative methods to help fund its infrastructure buildout to reduce its own capex, including getting upfront payments and having customers buy their own hardware.

Its RPOs were up $209 billion year over year, and $26 billion sequentially. Oracle forecasted that it will spend between $90 billion and $95 billion in capex this year. However, it said net cash capex will be $70 billion or below.

While Oracle's data center capex is a lot less than the big three cloud providers of Amazon, Microsoft, and Alphabet, the company's balance sheet is not as strong and its cash flow is not as robust. However, its $23.1 billion in operating cash flow was a big jump from the $8.1 billion generated in Q1 of last year, and its total operating cash flow in fiscal 2026 was only $32 billion. Still, it spent $28.5 billion in capex in the quarter, so its free cash flow came to an outflow of $5.5 billion. To help pay for its investment, it sold $20 billion in stock in the quarter through an at-the-market equity program.

Oracle also carries a fairly heavy debt load, stemming from a past of large acquisitions and aggressively stock buybacks. It ended last quarter with $125.3 billion in debt against $37.1 billion in cash and marketable securities. The combination of its debt and current negative cash flow makes its AI infrastructure bet a riskier one versus its large cloud competitors.

Turning to its fiscal Q1 results, Oracle's revenue soared by 30% to $19.35 billion, which topped the $19.14 billion analyst consensus, as compiled by LSEG. Cloud revenue jumped 62% to $11.6 billion. Within the cloud segment, cloud infrastructure revenue surged by 121% to $7.4 billion while cloud application revenue rose by 10% to $4.2 billion. Software segment revenue, meanwhile, fell 3% to $5.6 billion.

Adjusted earnings per share (EPS) climbed 30% to $1.92. That easily topped the $1.74 analyst consensus.

Looking ahead, Oracle upped its full-year fiscal guidance, taking it from adjusted EPS of $8.05 on revenue of $90 billion, to adjusted EPS of $8.10 on revenue of "at least" $90 billion.

For its fiscal third quarter, it forecasted revenue would rise by between 30% to 34%, and for cloud revenue to soar by 65% to 71%. It projected its adjusted EPS will rise by 21% to 25% to a range of $1.85 to $1.93.

Image source: The Motley Fool.

Is it time to back up the truck and buy the stock?

Given its AI infrastructure investments and backlog, Oracle should see explosive revenue growth in the coming years. Given some of its unique contracts with pre-pay or bring-your-own-hardware stipulations, it probably would be in the stock's best interest if management went over its cloud economics. This is something that Amazon and Alphabet have done, and it could be reassuring to investors if the company was getting a quick payback on its investments.

From a valuation perspective, Oracle now trades at a forward price-to-earnings ratio of under 19 and below 14 times based on fiscal 2028 estimates, although you do need to remember its debt load and future negative free cash flow. I wouldn't be backing up the truck, but I think the stock is worth the risk of adding some shares here.

Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.