JPMorgan Research Report Analysis: Oracle’s Backlog Increases by 26 Billion, Funding Path Questioned

By Rita

Oracle's remaining performance obligations (RPO) for F1Q27 reached $664 billion, up $26 billion quarter-over-quarter and 46% year-over-year. Cloud infrastructure (IaaS) revenue was $74 billion, up 121% year-over-year. In a report issued on September 11, 2026, JPMorgan reiterated its Overweight rating with a price target of $200. Debates over Oracle's funding situation in the market have not subsided.

JPMorgan noted that new AI contracts exceed $30 billion, primarily structured with upfront payments or bring-your-own-hardware (BYOH) arrangements, requiring no additional cash from Oracle. Investors continue to debate whether Oracle can navigate past the capital expenditure peak after FY28. Earnings data has addressed concerns regarding the revenue trajectory, but funding remains the focal point.

IaaS Growth of 121% Beats Consensus

Oracle reported total revenue of $19.35 billion for F1Q27, up 30% year-over-year, surpassing JPMorgan's expectation of $19.25 billion and the market consensus of $19.13 billion. Cloud revenue totaled $11.6 billion, up 62% year-over-year, including IaaS at $7.4 billion (up 121% YoY), SaaS revenue of $4.2 billion (up 10% YoY), and software revenue of $5.6 billion (down 3% YoY).

Gross margin stood at 61.0%, below JPMorgan's and the market consensus forecast of 62.0%, mainly due to data center ramp-up costs and the infrastructure mix. Operating profit was $8.15 billion with a margin of 42.1%, in line with JPMorgan's expectations. Earnings per share came in at $1.92, beating JPMorgan's $1.76 estimate and the market consensus of $1.75, with the upside attributed to items below the operating line.

Backlog Increases $26 Billion Quarter-over-Quarter

RPO reached $664 billion, up 46% year-over-year and $26 billion quarter-over-quarter. New AI cloud contracts signed this quarter exceeded $30 billion. Management clarified that while these contracts still require capital expenditure, they do not require additional cash outlays from Oracle, as they are funded through supplier financing, customer hardware purchases, or upfront customer payments. Approximately half of the RPO is expected to convert to revenue within 36 months.

In terms of capacity delivery, 50MW were delivered this quarter, nearly triple the volume for the full F4Q26, and without relying on flagship sites under investor scrutiny. Cumulative deliveries since F4Q26 have reached 850MW, with existing clusters operating at a 97.9% GPU utilization rate. The Abilene site delivered 131,000 GPUs, 1.9 times that of F4Q, with 75% already handed over. Construction in New Mexico is proceeding on schedule, and grid power for Wisconsin is currently being designed.

FY27 Guidance Beats Consensus, Funding Status Undetermined

FY27 revenue guidance is set at least at $90 billion, up 34% year-over-year, exceeding the market consensus of $89.6 billion. EPS guidance for FY27 stands at $8.10, above the market consensus of $8.00. Capital expenditure guidance ranges from $90 billion to $95 billion, with net cash capital expenditure capped at $70 billion, implying a $20 billion to $25 billion offset from upfront payments and supplier financing.

Management reiterated that FY27 and FY28 are peak capex years but did not provide a timeline for free cash flow to turn positive. JPMorgan estimates Oracle will raise more than $20 billion in average financing annually over the next few years, with free cash flow remaining negative through FY30. Investors worry that tightening access to credit or equity markets could force Oracle to slow construction or seek funding under dilutive terms.

$200 Price Target, Valuation Trades at a Discount

JPMorgan's $200 price target is based on approximately 13x EV/adjusted operating profit, mapping to a 2028 operating profit forecast of $62 billion. Trading at $152.94 as of September 10, 2026, there is roughly 31% upside. Oracle trades at a significant valuation discount compared to AI infrastructure peers and enterprise software companies. JPMorgan sees upside potential from profit growth and valuation re-rating.

Risks include customer concentration, with OpenAI accounting for over 50% of Oracle's RPO either directly or through the Stargate project. If anchor customers restructure, reduce commitments, or fail to pay, RPO would overstate collectible revenue. Access to funding and capital costs, capacity delivery, and margin ramp-up also pose downside risks.

Oracle's revenue trajectory is now clear, but securing funding remains the hurdle the market must overcome.

Disclaimer

This article compiles and interprets a third-party broker research report (JPMorgan, September 11, 2026) by TechFlow Research, alongside publicly available market information. The ratings, price targets, earnings forecasts, and related assessments cited herein reflect the views of the respective broker analysts, represent only the stance of their institutions, do not constitute the views of TechFlow Research, and do not amount to any investment advice.

Markets carry risk; decisions must be made independently. This article should not serve as a basis for buying or selling any securities.