Shares of Oracle (ORCL 2.01%) are trading down roughly 43% (as of Dec. 23, 2025) from their all-time high of $345.72 in September 2025. Investors have been concerned about the company's ability to convert heavy artificial intelligence (AI) and cloud spending into near-term revenue and earnings, as well as about the incremental debt required to fund the AI infrastructure to convert its contracted backlog into revenue.
However, that skepticism looks increasingly unjustified. Here's why.
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Oracle has multiyear revenue visibility
Oracle exited the second quarter of fiscal 2026 (ending Nov. 30, 2025) with remaining performance obligations of $523 billion, up 433% year over year, driven by large, long-term cloud infrastructure contracts with customers such as Nvidia and Meta Platforms. With a backlog several times higher than even the company's fiscal 2026 annual revenue guidance of $67 billion, the company enjoys exceptional multiyear revenue visibility.
NYSE: ORCL
Key Data Points
Even modest conversion of this backlog into revenue can have a meaningful impact on the company's earnings. The portion of the RPO expected to be recognized over the next 12 months rose 40% year over year, accelerating from the 25% growth in the prior quarter. Additionally, with significant cloud capacity expected to come online in the near term, management anticipates $4 billion of incremental revenue in fiscal 2027 from the newly added RPO in the second quarter.
Oracle is also not pursuing growth at any cost. Instead, the company signs customer contracts only when land and power availability for data centers, supply economics, and engineering capability are ensured. The company is targeting gross margins of 30% to 40% for all of its AI data centers.
While capital expenditures are high, the company plans to control borrowing by opting for alternative funding structures such as customer-owned chips and supplier-leased chips, which will reduce upfront cash requirements.
Valuation
At 24.7 times forward earnings, Oracle stock seems reasonably valued, given its multiyear revenue visibility, disciplined growth strategy, and rising focus on debt management. Hence, the company's shares appear well-positioned to soar in the coming months.
