Could Oracle Stock Give Back Its Gains?

Key Points

• Oracle's backlog ballooned after several multi-billion-dollar cloud deals.

• Some investors may be worried about backlog conversion and timing.

• Short-term volatility is possible, but the long-term setup looks stronger than it did before earnings.

• 10 stocks we like better than Oracle ›

Wednesday's post-earnings spike has faded some, with the shares slipping on Thursday as investors digested what Oracle (NYSE: ORCL) just reported and, more importantly, what it implied. Oracle, the enterprise software and cloud-infrastructure provider, shocked the market with a massive backlog figure tied to multiyear artificial intelligence (AI) and cloud contracts. The question now is whether those commitments will translate into revenue quickly enough to support the stock's move.

In the near term, anything can happen to the share price. Over a multiyear horizon, though, Oracle's remaining performance obligations (RPO) and the company's plan to scale cloud infrastructure point to better revenue visibility than before this report.

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Incredible growth, but RPO timing is the focus

Oracle's first quarter of fiscal 2026 showed solid top-line growth and exceptional momentum in cloud infrastructure. Total revenue rose 12% year over year to $14.9 billion, while cloud infrastructure revenue increased 55% to $3.3 billion; non-GAAP earnings per share was $1.47, up 6% year over year. And then there was, of course, Oracle's mouthwatering RPO, which soared 359% to $455 billion after four multi-billion-dollar customer contracts, according to the company's earnings release.

Safra Catz praised the quarter's results as "astonishing," adding that demand for Oracle Cloud Infrastructure (OCI) "continues to build."

The natural follow-up is how and when that RPO turns into revenue. Oracle's latest 10-Q breaks out expected recognition: about 10% within the next 12 months, roughly 25% in months 13 to 36, 34% in months 37 to 60, and the remainder after five years. In other words, this is a multiyear backlog with a meaningful back-weighted component -- helpful for long-term visibility, but watching it play out will require patience.

What could go wrong

But there's likely good reason for some investors to be a bit skittish.

First, the RPO figure includes amounts not yet billed; conversion depends on Oracle deploying data center capacity on schedule and customers ramping consumption as planned.

Second, the scale of what Oracle is attempting -- adding capacity, standing up multicloud data centers, and integrating with large partners -- could introduce timing slippage.

Against those risks, management at least provided visibility into how the backlog translates into the financial model. Catz previewed a sharply higher multiyear outlook for OCI revenue: up 77% to $18 billion this fiscal year, then rising to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years -- "most of the revenue in this five-year forecast is already booked in our reported RPO." That explicit bridge from signed contracts to future revenue is unusual in its specificity and helps investors frame what RPO means for the income statement over time. Oracle chairman and chief technology officer Larry Ellison also pointed to surging multicloud database revenue with Amazon, Alphabet's Google, and Microsoft, and teased new AI-centric database capabilities that could further support demand.

Valuation and positioning matter here, too. Even after Thursday's pullback, the stock remains near all-time highs and, by simple measures like price-to-earnings, trades at a premium to many large software names. That does not automatically make the shares unattractive. But it does leave less room for disappointment if backlog conversion or capacity ramps slip.

Stepping back, shares could certainly give back more of their recent gains if sentiment cools or if conversion proves slower than hoped. But the combination of a substantially larger, time-phased backlog, rising cloud infrastructure revenue, and a more detailed multiyear plan leaves Oracle's long-term setup stronger than it was before this game-changing quarterly update. For investors thinking in years, not quarters, that's the more important change.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.