Oracle’s (ORCL) AI land grab has gotten a lot bigger over the past few weeks.
Just days after announcing a five-year, $300 billion deal to funnel 4.5 gigawatts of compute to OpenAI, Oracle’s pipeline isn’t just swelling; it’s locking in.
Moreover, its Remaining Performance Obligations (RPO) surged 359% year-over-year to $455 billion, with the management hinting that the figure will soon top the half-trillion mark.
That incredible scale has effectively reshaped Oracle’s balance sheet and its positioning in the AI narrative.
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2025 has mostly been a blur of data-center buildouts, mega contracts, and a cloud business that’s become Oracle’s center of gravity. On top of that, Oracle stock has run red-hot this year, and is tracking over 81% higher on a year-to-date basis. Over a 6-month period, those gains jump even higher at 96%.
However, just days following its brand spanking new deal, Moody’s analysts just dropped a shock call that matters as much as the contract itself. If the firm’s read is correct, the call will likely have many implications for backlog quality, cash-flow timing, and how the market perceives Oracle’s growth machine.
Moody’s highlights counterparty risk in Oracle’s AI megadeal
Moody’s raised a major red flag on Oracle’s much-touted $300 billion AI infrastructure deal with OpenAI.
Though the contract marks the largest in Oracle’s history, analysts at the firm believe that the concentration puts outsized financial pressure on the company if OpenAI stumbles.
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Oracle’s AI cloud business is arguably the centerpiece of its potent growth strategy, with its RPO soaring a whopping 359% year-over-year. That powerful surge reflects demand, but it also reflects how Oracle’s sales pipeline is tied to just a handful of big clients.
Moody’s points out that if OpenAI potentially delays payments, restructures, or shifts strategy, it will likely have a disproportionate impact on Oracle’s. Given the massive scale of the OpenAI deal and its five-year horizon, even the smallest disruptions can have a substantial impact on Oracle’s balance sheet.
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Additionally, Moody’s estimates that Oracle’s leverage may climb to nearly four times EBITDA before the new contracts kick in and offset the higher borrowing costs. Also, Moody’s hasn’t altered Oracle’s current Baa2 rating but signaled that the continued customer concentration and growing debt load can trigger further action if its financials don’t improve.
Oracle Q1 earnings: AI push gets a fresh $300 million boost
Oracle paired its superb fiscal Q1 update with a head-turning $300 million AI infrastructure contract, adding to the list of megadeals that are reshaping its robust cloud backlog.
The deal fits in seamlessly into Oracle’s expanding AI pipeline, underscoring the management’s message that compute demand is still comfortably outpacing supply, while bookings remain the key indicator to watch.
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Oracle said that its RPO for AI cloud infrastructure bookings has surged 359% year-over-year to a whopping $455 billion, which shows that contracted work is compounding significantly quicker than delivery capacity.
However, these developments are not without their risks.
Investors need to watch out for large, multi-year infrastructure agreements potentially pressuring Oracle’s liquidity needs before the sales catch up.
Moreover, customer concentration and data-center execution remain critical swing factors to consider. Hence, it’s imperative for investors to continue monitoring mix, margins, and the pace at which Oracle is able to convert the backlog to revenue.
- RPO (AI infrastructure): $455 billion, representing a massive 359% improvement year-over-year.
- New AI contract: Oracle added $300 million to its swelling backlog
- Management outlook: RPOs are expected to soar past the eye-catching $500 billion mark soon.
- Balance-sheet watch: Leverage could approach 4x EBITDA in the near term. Also, free cash flow numbers may tighten as buildouts ramp up.
- Customer mix: growth is still led by a small set of very large buyers.
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