Oracle Has the Biggest Backlog in the AI Industry. Here’s Why the Stock Is Still Down 49%.

Oracle’s (ORCL) recent earnings revealed an impressive $638 billion pipeline of future contracts. The magnitude of this backlog — now bigger than Microsoft’s (MSFT) $627 billion backlog — suggests customers find the company more attractive than competitors like Microsoft, Alphabet's (GOOGL) Google Cloud, and Amazon's (AMZN) AWS. Despite this, ORCL stock is down 49% from its 52-week high of $345.72. If the company’s business is so attractive, why isn’t the stock responding accordingly?

The answer is straightforward, but at a time when the AI trade is going strong, investors may not be paying attention. Oracle’s free cash flow (FCF) turned negative during the just-concluded fiscal 2026. From 2022 to 2024, FCF grew at a healthy rate before plummeting in 2025. Then in fiscal 2026, free cash flow came in at -$23.7 billion, which is no small figure. Oracle is set to raise an additional $40 billion through debt and equity issuance. The resulting dilution won’t be pretty for existing shareholders.