Oracle’s $664 billion AI backlog comes with a hefty execution bill

Oracle has a record order book. It is also spending heavily, and burning cash, to fill it.

The company’s fiscal Q1 2027 report showed remaining performance obligations of $664 billion as of August 31, 2026. That figure is up $209 billion, or 46%, from a year earlier. Remaining performance obligations are contracted revenue Oracle has signed but not yet delivered.

The question now is less about demand and more about timing. Can Oracle turn signed contracts into running data centers, and then into cash, before the bills catch up?

The numbers behind the backlog

The jump in Oracle’s backlog came largely from more than $30 billion in new artificial intelligence cloud contracts.

Revenue is starting to follow. Oracle’s cloud infrastructure revenue climbed 121% year-over-year to $7.4 billion in the quarter.

On the physical side, Oracle delivered 850 megawatts of AI capacity during the quarter. It also deployed more than 300,000 GPUs. GPU utilization ran at roughly 98%.

Oracle expects nearly half of the backlog to convert into revenue over the next three years. About 13% is expected to turn into revenue within the next year.

The cost of keeping up

Oracle’s quarterly capital expenditures came in at approximately $28 billion to $28.5 billion.

That spending pushed free cash flow to negative $5.4 billion, even though operating cash flow stayed positive.

Oracle has flagged fiscal 2027 and fiscal 2028 as its peak capex years. For fiscal 2027, the company estimates gross capital expenditures of $90 billion to $95 billion.

Concentration, power and financing

One name looms large in Oracle’s order book. Half of the backlog is tied to OpenAI.

Oracle’s non-OpenAI AI backlog more than doubled year-over-year, suggesting the customer base is broadening even as the headline relationship dominates.

Delays in power and permitting are now central to the execution story. Specific trouble spots include a pipeline in New Mexico and a campus in Wisconsin.

Investor Michael Burry has raised concerns about the customer-financing arrangements used in some of Oracle’s contracts. When a vendor helps finance the customer buying its services, the quality of that revenue depends heavily on the customer’s long-term health.

What this means for Oracle and the AI trade

The 13% near-term conversion figure is worth watching closely. If Oracle hits it, the narrative shifts toward delivery. If it slips, the conversation shifts toward balance sheet strain and customer risk.

With half the backlog tied to OpenAI, Oracle’s fortunes are linked to one company’s growth trajectory and funding. Continued growth in the non-OpenAI segment would ease that dependence.

Key markers ahead include progress on the New Mexico and Wisconsin projects, quarterly capex against the $90 billion to $95 billion fiscal 2027 estimate, and whether free cash flow trends toward breakeven. Any further detail on the customer-financing structures Burry flagged will also shape how the market values that $664 billion figure.