I’m Making a Contrarian Bet on Oracle at What Seems Like The Worst Moment Possible Alex Sirois Mon, October 12, 2026 at 10:45 AM EDT 4 min read ORCL -2.55% MSFT +1.16% AMZN -0.39% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Oracle holds a $664 billion signed backlog with cloud revenue up 121%, despite shares falling over 50% in the past year.
Oracle grows revenue nearly twice as fast as Microsoft or Amazon yet trades at a forward P/E of 18 versus their 24-25.
Free cash flow hit -$5.40 billion as capex surged 235%, but operating cash flow rose 184% to $23 billion.
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I bought more Oracle (NYSE:ORCL) again this month, and every new wave of selling makes me want to buy more. Shares closed at $141.40 on October 9, down 51.75% over the past year and 26.49% year to date. A report on OpenAI's revenue sent AI stocks lower, and observers now describe an AI credit scare hitting Oracle. When I look past the headlines, I see a growing order book priced below the hyperscalers most investors buy first.
My conviction comes down to one thing: Oracle has already signed the customers. Remaining performance obligations reached $664 billion, up $209 billion year over year. Oracle booked more than $30 billion in new AI contracts in Q1 alone. Management expects around half of that RPO to convert into sales over the next 36 months.
That conversion has started. Cloud infrastructure revenue rose 121% to $7.39 billion, and cloud now makes up 60% of revenue, up from 48% a year ago. GPU utilization hit 97.9%, and GPUs up for renewal, most of them four years or older, renewed or resold at a 20% premium. That answers my biggest worry about AI hardware losing value fast.
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Oracle grew revenue 29.6% last quarter and carries a forward P/E of 18. Microsoft (NASDAQ:MSFT) is valued at a forward P/E of 25 with quarterly revenue growth of 17.7%. Amazon (NASDAQ:AMZN) trades at a forward P/E of 24, grew revenue 19.6%, and pays no dividend. Oracle gives me more growth per dollar of earnings, plus income.
Oracle pays $0.50 per quarter, a 1.48% yield, versus 0.7% at Microsoft. The record shows quarterly payments since 2009, starting at $0.05. Q1 adjusted EPS of $1.92 beat the $1.74 consensus. Management guides fiscal 2027 to at least $90 billion in revenue and $8.10 in non-GAAP EPS.
Free cash flow came in at -$5.40 billion as capex rose 235.2% to $28.50 billion. Management expects $90 billion to $95 billion in capex this fiscal year. The company's interest expense rose 55% to $1.4 billion, and a completed $20 billion equity issuance diluted my stake. On 24/7 Wall St.'s The AI Investor Podcast, the hosts warned that "debt is leverage and leverage causes volatility." A one-year drawdown past 50% shows it.
My thesis holds because operating cash flow rose 183.82% to $23.10 billion, and cash capex net of customer prepayments was $18 billion. Most new contracts use prepayment or bring-your-own-hardware structures requiring no additional Oracle capital. Oracle's Hilary Maxson said scaled projects deliver "a free cash flow conversion ratio of something like 100% to post-tax EBITDA.". Cash stands at $36.37 billion.
Q2 guidance calls for cloud revenue growth of 65%-71%. Multicloud database revenue grew 353% across 70 regions, turning rival clouds into distribution partners. Barron's also reported that an Oracle insider bought stock amid the OpenAI swings. The backlog is signed and the GPUs are full, so the dividend should keep coming as that $664 billion turns into revenue.
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