I keep hitting the buy button on Oracle (NYSE:ORCL | ORCL Price Prediction), and the reason is embarrassingly simple: I have never seen a book of business this large sitting under a stock this beaten up. Shares closed at $147.02 on August 7, down 40.37% over the past year and 33.43% below where they sat the day of the Q2 revenue miss last December. Meanwhile the contracted backlog just went vertical.
The Core Thesis: A Backlog That Underwrites the Guidance
Oracle closed Q4 FY2026 with $638 billion in Remaining Performance Obligations, up 363% year over year. These are binding, multi-year enterprise contracts, largely driven by compute-hungry AI workloads including multi-billion dollar commitments from OpenAI, Meta, and xAI. Roughly $76 billion, or 12%, converts to top-line revenue over the next 12 months, effectively pre-funding next year’s guidance before a single new deal is signed. CFO Hilary Maxson told analysts the RPO “provides exceptional visibility into our future revenue growth”. That is the sentence I keep coming back to.
The Data Case
Three receipts. First, growth is real and it is in the right place. Cloud Infrastructure grew 93% year over year to $5.787 billion, and total cloud revenue is now 52% of quarterly sales, up from 43% a year ago. Q1 FY2027 guidance calls for cloud revenue growth of 58% to 64%.
Second, the valuation is reasonable on its own terms. The forward P/E sits at 18, the PEG ratio is 0.831, and management reconfirmed a 31% revenue CAGR and 28% EPS CAGR through fiscal year 2030. FY2027 non-GAAP EPS is guided to $8.05.
Third, the checks keep coming. The quarterly cash dividend is $0.50 per share, and operating cash flow for the year was $32 billion, up 54%. Return on equity is 53.4%.
Why Not the Hyperscalers
The obvious alternatives are Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL). I own some of those too. But Oracle is running a strategy the others cannot copy: it is building 72 Oracle Multicloud datacenters embedded inside Amazon, Google, and Microsoft clouds. Oracle collects whichever hyperscaler wins the workload. The Multicloud AI Database business grew 404% in Q4. I do not need to guess the winner at a PEG of 0.831.
The Real Risk
Free cash flow was negative $23.686 billion against CapEx of $55.663 billion, and total liabilities sit at $218.703 billion. Retail investors are also nervous about the 346 million Oracle shares Larry Ellison has pledged as loan collateral. Both are real. What holds my thesis together is that $75 billion of the RPO is either bring-your-own-hardware or prepaid, meaning customers front the capital. Management pegs steady-state ROIC on infrastructure projects in the high 20s. That is a company being paid to build, with customers fronting the capital.
Forward Conviction
Analysts covering the name carry a consensus target of $247.17, with 37 of 44 rating it Buy or Strong Buy. For this thesis to work, $638 billion in signed contracts needs to convert to revenue on schedule, and I am being paid a dividend to wait. The buy button stays active.
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