A stock shedding 59% of its value from a record high sends a clear signal: something about the spending plan worries investors. Capital expenditures, the money set aside for physical assets like data centers and servers, are at the core of that worry. Oracle Corporation (ORCL) has telegraphed a sharp rise in those costs for fiscal 2027, and the market has priced in the risk.
To fund the expansion, Oracle has said it intends to raise $40 billion through a combination of new debt and new shares. More debt raises financing costs. More shares spread existing ownership thinner, a process called dilution. Together, those pressures help explain a selling campaign that has pulled the stock more than halfway from its record high.
What Oracle actually has contracted
The case for the stock rests heavily on a figure called remaining performance obligations, or RPO. In plain terms, RPO is contracted revenue that has not yet shown up on the income statement: work the company has already sold but not yet delivered. Oracle's RPO stood at a record $638 billion as of its last reported figures.
Oracle expects a meaningful portion of that backlog to convert into recognized revenue in fiscal 2027. The company projects total revenue growth of roughly 34% for the year, a significant acceleration from the 17% growth recorded in fiscal 2026. Those are projections, not guaranteed results.
Beyond the backlog, Oracle recently disclosed $67 billion in AI infrastructure contracts. Many of those deals involve customers paying in advance or supplying their own hardware. That structure has pushed the combined value of prepaid and customer-supplied AI contracts to $75 billion. Four individual customers each signed agreements exceeding $8 billion.
The margin question and what management has guided
Profit margins may face some pressure in fiscal 2027 while new data centers are built and brought online before they generate meaningful revenue. Oracle has also said it expects modest year-over-year reductions in operating expenses, which should partially offset that drag.
For the first quarter of fiscal 2027, Oracle guided for adjusted earnings per share of approximately $1.72 to $1.76, representing year-over-year growth of roughly 17% to 20%. Management has said it expects revenue and earnings growth to strengthen in the second half of the fiscal year as additional data center capacity comes online.
Looking further out, Oracle has maintained a longer-term target of compounding revenue and earnings at annual rates of approximately 31% and 28% respectively through the end of the decade. Oracle analysts currently hold a "Strong Buy" consensus rating on the stock.