Oracle’s $125 Billion Tightrope: Record Cloud Orders Meet a Cash Flow Crisis

Oracle is racing to transform itself into an AI-first enterprise software giant, but the journey is proving both costly and contentious. The company’s dual narrative—explosive cloud demand on one side, a ballooning debt pile and a cancelled hardware order on the other—has left investors divided and the stock under pressure.

The software veteran recently unveiled 22 new “Fusion Agentic Applications” at its AI World Tour in London, part of a broader push to embed artificial intelligence across its product suite. Vice President Steve Miranda outlined a vision where manual software tasks are replaced by autonomous AI workflows. Oracle has already integrated over 1,000 such AI agents into its ecosystem, offering them to customers within existing license agreements at no extra charge. The company sees these tools becoming the default in corporate operations over the medium term.

On the partnership front, Oracle deepened its ties with Google Cloud, launching a new Gemini Enterprise agent that allows users to query Oracle databases using natural language—eliminating the need for SQL skills. The service is now available across 15 regions, with data remaining at its source location.

The strategy is producing eye-popping top-line numbers. Cloud infrastructure revenue surged 84% in the latest quarter to $4.89 billion, while remaining performance obligations (RPO) skyrocketed to $553 billion. GPU-as-a-service revenue jumped 177% year-over-year, and multi-cloud database usage exploded by more than 800%.

But the cost of building out the data centers to fulfil those orders is staggering. Oracle plans capital expenditures of up to $50 billion for fiscal 2026, leaving the balance sheet groaning under long-term debt of roughly $125 billion. Free cash flow over the past four quarters has turned deeply negative, coming in at nearly minus $25 billion.

Should investors sell immediately? Or is it worth buying Oracle?

The financial strain is feeding skepticism on Wall Street. Morgan Stanley recently cut its price target on Oracle, questioning margins in the GPU-as-a-service business. Legal headwinds are also building: a class-action lawsuit accuses management of making misleading statements about the risks to cash flow from the AI infrastructure buildout.

Adding to the unease, reports emerged that Oracle cancelled a large hardware order with Super Micro Computer—valued at over $1 billion and involving hundreds of server racks. Super Micro declined to comment, pointing instead to its quarterly results scheduled for May 5.

The stock reflects the tension. Shares traded at €153.28 in recent sessions, down more than 8% year-to-date and 45% below their 52-week high. The relative strength index (RSI) sits at 20.7, signaling deeply oversold conditions. Shareholders can expect a planned quarterly dividend of $0.50 per share.

Analysts, however, remain broadly bullish. The consensus rating is “Strong Buy,” with an average price target around $245. They argue that the massive investments are backed by firm contracts, reducing the risk of a cash crunch. Institutional investors appear to agree: Kerusso Capital Management recently boosted its stake by roughly a third.

Oracle’s management is targeting $90 billion in revenue for fiscal 2027, driven by the AI pivot and ongoing multi-cloud partnerships with Amazon and Google. The challenge now is converting that $553 billion backlog into actual free cash flow—before the debt burden weighs any heavier on the shares.