“The Big Short” investor Michael Burry published an analysis arguing that Oracle Corp. (NYSE:ORCL) effectively uses its $664 billion backlog to fund infrastructure, turning customers into lenders. The report argues that Oracle’s contract structures mask debt obligations within the AI expenditure cycle.
Oracle Contract Structures and Backlog
Burry’s Substack analysis highlights that Oracle’s Remaining Performance Obligations (RPO), reaching $664 billion on Aug. 31, represent a $209 billion year-over-year increase. In the first quarter, Oracle secured more than $30 billion in new AI contracts, which the company stated were signed “without requiring additional capital from Oracle.”
In the graphic he shared by him on X, Burry contends that this occurs “(BECAUSE THE INCREMENTAL CAPITAL IS THE CUSTOMERS’)” He states, “The customer is now the lender to Oracle.” Under the financing-component convention, revenue recognized on these contracts will exceed the cash received
He describes a portion of future cloud infrastructure revenue growth as a “financing gross-up, manufactured by the structure rather than by usage.” The analysis points to rising costs, with Oracle’s interest expense reaching $1.43 billion for the quarter, a 55% increase.
The Hyperscaler Buildout
The Oracle assessment is part of a broader critique of the “Big 5 public hyperscalers,” which include Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Meta Platforms Inc. (NASDAQ:META), and Oracle Corp. (NYSE:ORCL).
Burry identified $3 trillion in aggregate purchase commitments, future leases, and guarantees backing third-party debt across these companies.
He characterizes the market as being in the middle of a “capital cycle.” According to Burry’s chart, S&P 500 net investment divided by Nominal GDP sits at 2.07%, a level he states is higher than any other time in the last four decades, excluding the aftermath of the March 2000 tech bubble peak.
He predicts these companies will face massive depreciation expenses and write-downs as free cash flow turns negative and borrowing increases.
How Has ORCL Performed in 2026?
Price Action: At the last check, the ORCL stock was up 0.55% in overnight trading. It is down 50.72% over the last year, 26.99% year-to-date, and 2.37% over the last month. The stock closed up 3.06% at $142.30 on Friday.
Benzinga’s Edge Stock Rankings indicate that ORCL maintains a weak price trend in the short, medium, and long terms, with a poor value score.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
Login to comment