Evercore Maintains Oracle FY2027 Revenue Outlook as Remaining Performance Obligations Reach $638 Billion
Alina Collins
Oracle's 10-K filing reveals remaining performance obligations surging to $638 billion, up 363% year-over-year. Evercore maintains its Outperform rating and $245 target, but capex more than doubling in one year plus a ~$20 billion equity issuance plan puts near-term cash flow and dilution squarely at the center of the bull-bear debate.
$638 billion in backlog — what does this number actually tell us?
Oracle's remaining performance obligations (RPO — the total value of contracts signed but not yet recognized as revenue) reached $638 billion, up 363% year-over-year and $85.4 billion higher than the prior quarter.
This means → demand for Oracle's cloud infrastructure (OCI) is still accelerating, not plateauing.
Of that total, $77 billion now covers 86% of the next 12 months' expected revenue, up from 68% previously. In plain terms = Oracle used to have contract-backed visibility on roughly seven-tenths of next year's income; now it's closer to nine-tenths. Near-term revenue certainty has materially improved.
Capex more than doubled in one year — where is the money coming from and going?
FY2026 capital expenditure jumped from $21.2 billion to $55.7 billion, pushing free cash flow to roughly negative $23.7 billion.
This means → Oracle's operating earnings no longer cover its buildout spending; the company must raise capital externally at scale.
FY2027 capex is guided to $90–95 billion, with roughly $70 billion to be externally financed. The spending peak is expected in FY2027–FY2028.
In plain terms = Oracle is running a "spend first, monetize later" playbook on AI infrastructure — a tempo reminiscent of Amazon AWS's early expansion years.
Financing shifts to equity — what does that mean for shareholders?
Oracle historically favored share buybacks; FY2026 repurchases collapsed to just $93 million, effectively zero.
The company is pivoting to equity financing: it has expanded its underwriting syndicate and plans to issue ~$20 billion in common stock over the coming quarters. As of May 31, 2026, no shares had been sold under the at-market agreement.
This means → existing shareholders face dilution — the same earnings pool split across more shares. This reflects Oracle choosing a "dilute for growth" path over "lever up with debt" for its AI buildout.
Headcount down 21,000 — efficiency signal or structural reset?
The 10-K shows Oracle's workforce shrank by roughly 21,000 year-over-year.
Evercore analyst Kirk Materne views the reduction as a partial offset to the structural margin pressure from scaling cloud infrastructure.
In plain terms = cloud infrastructure carries inherently lower margins than traditional software licenses. Oracle is cutting headcount to counterbalance that structural drag and protect overall profitability.
The core bull-bear question — wait for dilution to land, or buy now?
Materne acknowledges some investors may prefer to wait until the ~$20 billion equity raise is largely complete before stepping in, avoiding the dilution overhang.
He stays bullish on two grounds: ① an inflection in the applications software business is expected in FY2027 (the segment underperformed in fiscal Q4); ② first-half implied guidance looks conservative, and the current demand environment should sustain healthy OCI growth.
This means → the market's real test of Oracle's capex-expansion thesis comes down to one question: can revenue accelerate before equity dilution fully lands? If revenue runs ahead, dilution is the cost of growth; if it doesn't, dilution is just dilution.
Content is for reference only, not financial advice.