Forget Oracle's Stock Price Swings. Its Backlog-to-Revenue Ratio Tells the Real Story.

ORCL +5.96% NVDA +2.35% Despite strong growth for the company's cloud infrastructure business, Oracle (NYSE: ORCL) shareholders haven't had cause to celebrate the stock's performance in 2026. Its share price is down roughly 28% year to date -- and it's off 57% from its lifetime high.

While the stock hasn't been performing well lately, there are solid reasons to be excited about the business's future. For starters, the tech giant closed out its last reported quarter with a remaining performance obligation (RPO) of $664 billion. Here's why that's a number investors should pay attention to.

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Remaining performance obligation is a metric that tracks the value of services and products that have been contracted for but not yet delivered, and contracted sales that have yet to be recorded as revenue. With Oracle reporting an RPO of roughly $664 billion at the end of its last fiscal quarter, there's a strong outlook for demand for the company's artificial intelligence (AI) cloud infrastructure services.

Over the trailing-12-month period, Oracle has recorded sales of roughly $71.8 billion. In other words, the value of the company's backlog is roughly 9.2 times the sales it generated over its past four quarters. That suggests the company will see a massive sales ramp in the coming years.

Notably, Oracle's massive backlog isn't completely without risk. Of its RPO, roughly $300 billion comes from OpenAI -- the frontier artificial intelligence company behind ChatGPT and other technologies. This high level of customer concentration creates uncertainty. If OpenAI starts seeing weaker demand and scales back its own growth initiatives, it could wind up canceling some of its contracted spending with Oracle, or proceeding at a much slower pace.

On the other hand, that's a risk worth embracing for investors looking for reasonably valued plays in the AI infrastructure space. Oracle is guiding for its revenue to grow roughly 34% this year, and it also expects earnings to grow roughly 19% despite the high costs associated with ramping up its cloud infrastructure business.

With Oracle stock currently trading at roughly 17 times this year's expected earnings, the company could deliver huge gains for long-term shareholders if its cloud AI bets continue to pay off. Oracle's massive RPO looks promising and points to a strong rate of sales expansion over the next five years.

While there's a significant risk associated with the heavy RPO concentration in its OpenAI contract, it's also possible that the company will continue to win additional major deals. The choice of a top frontier AI leader to sign on with it for a massive amount of compute provides strong validation for Oracle's AI infrastructure offerings -- and that could translate into transformative business performance later.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.

Forget Oracle's Stock Price Swings. Its Backlog-to-Revenue Ratio Tells the Real Story. was originally published by The Motley Fool