Oracle (ORCL) shares surged over 11% in after-hours trading following a strong earnings report that exceeded Wall Street expectations, with revenue rising 22% year-over-year to $17.2 billion and adjusted earnings per share up 21% to $1.79. A standout metric was the staggering 325% increase in the company’s remaining performance obligations (RPO), now totaling $553 billion, largely driven by demand for Oracle Cloud Infrastructure and AI-related services.
However, a deeper dive into Oracle’s regulatory filings reveals potential risks associated with this impressive backlog. Approximately 54% of the RPO is tied to OpenAI, which has yet to turn a profit and may not do so until 2030. Additionally, Oracle’s disclosure about variable consideration raises questions about the reliability of this revenue, as it may not be fully collectible.
For investors, while Oracle’s stock appears attractively priced at 28 times earnings compared to its AI peers, the concentration risk related to OpenAI warrants caution. For a more comprehensive analysis, I recommend checking out the full article.
Source: fool.com