Oracle Corporation (ORCL Quick QuoteORCL - Free Report) has turned itself into one of the most talked-about names in enterprise technology, largely because of the scale of its bet on artificial intelligence (AI) infrastructure. The company is spending tens of billions of dollars building out AI data centers, funded partly through debt and equity issuance, and that capital intensity has made some investors nervous about the near-term path of free cash flow.

Yet a closer look at Oracle's underlying business, its rapidly expanding AI partnerships and its own forward-looking guidance suggests the near-term setup still favors buyers who can stomach the balance-sheet risk tied to this build-out, rather than investors waiting for full clarity before committing capital.

Shares of Oracle have lost 8.9% in the past six-month period, underperforming the Zacks Computer and Technology sector’s appreciation of 21.7%, a gap that reflects investor caution around Oracle's debt-funded capital spending rather than any slowdown in its underlying AI business.

ORCL Underperforms Sector in 6 Months

Image Source: Zacks Investment Research

AI-Driven Cloud Backlog Underpins the Growth Case

The clearest fundamental signal comes from Oracle's Remaining Performance Obligations, which reached $638 billion at the end of the fourth quarter of fiscal 2026, up 363% year over year and $85 billion sequentially. Most of that increase reflects large-scale AI contracts, and importantly, the prepaid and customer-supplied hardware portions of these agreements now total $75 billion, which meaningfully reduces the amount of capital Oracle itself must raise to build its AI data centers going forward. Cloud infrastructure revenues surged 93% in the quarter to $5.8 billion, while the Oracle Multicloud AI Database grew 404%, making it the company's fastest-growing business ever. These figures point to underlying demand that is outrunning Oracle's aggressive capacity additions, a dynamic that should keep utilization and eventually margins moving in the right direction as newly built megawatts of data center capacity come online through fiscal 2027.

Fresh AI Partnerships Signal Expanding Reach

Oracle's own news updates from July and August 2026 show a company widening its AI footprint on multiple fronts. In July, Oracle rolled out OCI Enterprise AI for OCI Dedicated Cloud, letting customers run production AI within strict data residency, sovereignty and governance boundaries, alongside expanded model choice through additions like GLM 5.2. In August, Oracle announced a multi-year partnership with Quantinuum to bring hybrid quantum computing to Oracle Cloud Infrastructure for AI, drug discovery and materials-science workloads, and OCI became one of the first cloud providers to offer NVIDIA's Nemotron 3.5 Lightning model on day zero. Oracle also deepened its Google Cloud partnership by connecting Gemini Enterprise directly to Oracle AI Database, giving joint customers real-time access to business data and opened registration for Oracle AI World 2026, underscoring continued platform momentum heading into fiscal 2027.

Fiscal 2027 Guidance Reinforces the Near-Term Bull Case

Oracle's own guidance gives investors concrete, company-sourced reasons to look past the debt load. For the first quarter of fiscal 2027, Oracle guided to total revenue growth of 27% to 29% and cloud revenue growth of 58% to 64% in U.S. dollars, with non-GAAP earnings per share of $1.72 to $1.76.

For the full fiscal year, Oracle confirmed its prior $90 billion total revenue target and raised its non-GAAP EPS guidance to $8.05, representing 18% growth after adjusting for one-time investment gains booked in fiscal 2026.

The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $8.03, suggesting 5.24% growth year over year. 

Management also indicated it does not expect to issue additional debt in 2026, having already outlined roughly $40 billion of planned debt and equity financing for fiscal 2027, including a previously announced $20 billion equity issuance, alongside a maintained quarterly dividend of 50 cents per share payable to shareholders of record. That combination of confirmed revenue targets, raised earnings guidance and a clearly defined financing plan gives the AI data center buildout a considerably clearer runway than headline capital-spending figures alone suggest, easing the financing overhang that has weighed on sentiment.

Valuation and Competitive Landscape

From a valuation standpoint, ORCL stock is currently trading at a trailing 12-month Price/Earnings ratio of 23.02x, which is higher than the sector average of 0.99x. The stock carries a Value Score of C, signaling that shares are priced richly against peers rather than at a bargain.

ORCL’s Valuation

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Oracle competes with Microsoft (MSFT Quick QuoteMSFT - Free Report) , Amazon (AMZN Quick QuoteAMZN - Free Report) and Alphabet (GOOGL Quick QuoteGOOGL - Free Report) in cloud and AI infrastructure, and all three continue pouring capital into rival data centers. Microsoft's Azure, Amazon's AWS and Alphabet's Google Cloud remain the scale benchmarks Oracle must keep outgrowing. Despite that premium valuation and the recent share-price pullback, ORCL's outsized RPO growth relative to Microsoft, Amazon and Alphabet gives investors a fundamentals-based reason to buy into weakness rather than wait for a cheaper entry point.

Conclusion

Oracle's debt-funded AI data center expansion carries genuine execution and financing risk, but the company's record backlog, widening AI partnerships and confirmed fiscal 2027 guidance collectively outline a credible path to accelerating growth. For investors comfortable with near-term balance-sheet pressure, Oracle's own fundamentals argue for building a position now rather than waiting on the sidelines for confirmation. ORCL stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.