Oracle (NYSE:ORCL) $553B Backlog, $48B Capex, Now We Find Out

The Biggest AI Infrastructure Bet Just Got Its First Payoff

Oracle surged more than 8% after hours after delivering a Q3 result that, for us, felt like a major proof point. It was the company’s first 20%-plus growth quarter in more than 15 years, suggesting its huge AI and data centre push is finally showing up in the numbers, but there are many risks ahead.

The stock has been volatile because the market has been questioning whether Oracle’s rising debt, bond issuance, and heavy capex would actually generate the returns needed to justify the risk. This has effectively been an all-in bet on AI infrastructure and data centre expansion, so investors wanted evidence that the spending was translating into real growth.

This quarter helped answer that, but this is still a short-term start. Oracle reported US$17.2 billion in revenue, up 22% year over year, marking its fastest organic growth in more than 15 years. Revenue came in above the top end of guidance, while non-GAAP EPS of US$1.79 also beat the high end of the company’s own forecast range.

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The Cloud Is Exploding, The Balance Sheet Is Sweating

The engine fuelling the move is Oracle’s cloud infrastructure business, which surged 84% to US$4.9 billion. That growth is being driven by AI workloads, with enterprises and hyperscalers choosing Oracle for GPU training and inference.

Cloud applications grew 13%, but the strongest metric was remaining performance obligations of US$553 billion, which is larger than Oracle’s market cap. This is essentially signed backlog for future cloud revenue, mainly tied to large-scale AI infrastructure deals.

Oracle also noted that most of these contracts are either pre-funded by customers or involve customer-supplied GPUs. That means Oracle is not having to raise equity to fund these commitments.

The margin story is that Oracle is in a heavy spending phase. The buildout is weighing on margins and operating expenses. Cloud and software cost of revenue grew 66%, well ahead of the 44% growth in cloud revenue.

Oracle is spending heavily to build GPU clusters and data centre capacity now in order to capture AI contracts that should generate revenue over the next three to five years. That may be the right strategy, but it remains a core risk. If growth slows, the level of reinvestment becomes much harder for the market to support.

22% Growth, 297% Capex

Oracle has effectively taken the crown for one of the biggest infrastructure bets in market history. In Q1 FY25, trailing capex was just US$7.8 billion. This quarter, it reached US$48.25 billion. That shows how aggressively Oracle is building out hyperscale data centre capacity to support its AI ambitions. Oracle spent only US$12.1 billion in the equivalent prior-year period, so this is a 297% increase.

The company is building new data centres, procuring GPUs, and expanding the physical infrastructure needed to honour its US$553 billion backlog of contracted demand. That is why so much of Oracle’s bull case now rests on this backlog converting into real revenue over time.

The pressure point is funding. Oracle said it plans to raise US$45 billion to US$50 billion in 2026 through a mix of debt and equity, including preferred stock, common equity, and investment-grade bonds. That means the company is relying heavily on external capital to fund this buildout, which pushes it further into a financing-heavy position.

Operating cash flow has remained solid, but free cash flow is moving sharply lower because of the scale of the investment. That is the trade-off. Oracle is spending at an extraordinary pace to capture a potentially massive AI opportunity, but if backlog conversion slows or returns disappoint, the financing burden becomes much harder for the market to ignore.

Oracle Went All In, Now the Revenue Has to Follow

Building data centres, securing power and land, procuring GPUs, and training a workforce to operate at this scale is genuinely difficult. Oracle has never run infrastructure at this scale before, and the US$134B debt load tied to this transition means the consequences of underdelivery are significant.

At the same time, the demand signal is hard to ignore. A US$553B backlog of contracted future revenue is about as strong as it gets in enterprise technology.