Something unusual happened June 11th. Oracle reported one of the strongest quarters in the company’s history, and the stock lost roughly 10% before lunch.
Revenue hit $19.2 billion, up 21% year-over-year. Cloud infrastructure grew 93%. Non-GAAP EPS of $2.11 beat the Street by more than 7%. Remaining Performance Obligations, the contracted future revenue backlog, surged 363% year-over-year to $638 billion, surpassing the RPOs of both Alphabet and Microsoft. Those are not the numbers of a company losing momentum.
And yet.
The market read the footnotes. Capital expenditures came in at $55.7 billion for fiscal 2026, roughly 162% higher year-over-year and above Oracle’s own prior guidance of $50 billion. Free cash flow swung negative $23.7 billion. Then management guided FY2027 capex to a range of $90 to $95 billion, which at the high end would actually exceed Oracle’s projected $90 billion in full-year revenue. To fund it, Oracle announced plans to raise $40 billion through a combination of new debt and a $20 billion at-the-market equity issuance. The dilution concern landed hard.
This is where it gets interesting.
The $638 billion RPO is not vaporware. A meaningful portion of it is tied to Stargate, the OpenAI-linked AI infrastructure project, along with multi-year commitments from Meta, NVIDIA, and other hyperscalers locking in OCI capacity. Management confirmed it plans to bring nearly one gigawatt of computing power online in the current quarter alone, roughly equivalent to all of fiscal 2026 combined. Oracle is guiding for Q1 FY2027 total cloud revenue growth of 57-63% in constant currency, and full-year revenue of $90 billion with non-GAAP EPS of $8.05, representing 18% growth. The backlog is not a distant promise. Much of it is front-loaded into the next two fiscal years.
The real debate here is not whether Oracle has demand. It clearly does. The question is whether the market is accurately pricing the ROI timeline on a company spending nearly its entire revenue base on capital expenditures in a single year while carrying $23.7 billion in negative free cash flow.
Slight tangent, but it matters: at 13.2x NTM EV/EBITDA, ORCL is roughly in line with SAP, a company growing at a fraction of Oracle’s pace. The market is applying a discount for tail risk around the Stargate relationship and capex execution. Whether that discount is rational or excessive depends almost entirely on how cleanly the backlog converts over the next 4-6 quarters.
Guggenheim told clients to buy ORCL aggressively on the selloff. The consensus price target across 43 analysts sits at $252.64, implying roughly 37% upside from recent levels near $184. The stock also won a $395.8 million, 10-year government contract the same week it reported earnings, which received almost no coverage.
What the Options Market Is Telling You
IV expanded sharply on the earnings move. Call flow above $200 strike has been active in the weeks following the selloff, with long-dated activity in Oracle drawing repeated attention as a forward-looking upside bet rather than near-term hedging. The selloff compressed the stock from a pre-earnings close near $201 to the $180-$184 range, a structural dislocation against a business that raised full-year guidance on the same day it reported a beat.
For traders who believe the capex overhang is already priced, defined-risk structures using call spreads in the $185-$230 range targeting Q1 FY2027 earnings in September carry a favorable asymmetry. The bear case rests on dilution, leverage creep, and Stargate dependency. The bull case is simply that a $638 billion RPO with accelerating quarterly additions does not stay unmonetized forever.
The stock is down from a 52-week high of $345.72. Full-year operating cash flow surged 54% to a record $32 billion. Oracle’s Multicloud AI Database grew 404% in Q4. The market is spooked by the bill. The underlying business has never been bigger.
What the market decides to believe over the next 90 days is the trade.