Big Short’s Steve Eisman: “Half of Oracle’s Backlog Is Just OpenAI”

Key Takeaways

• Oracle’s stock price has fallen 54% over the past year, but 80% of the analysts who follow the company still recommend buying its shares.
• Steve Eisman says OpenAI accounts for half of Oracle’s $638 billion backlog of signed contracts. This means much of Oracle’s growth depends on one customer being able to pay.
• Oracle’s free cash flow was negative $23.7 billion in fiscal 2026, and its total debt reached $167 billion. The company is borrowing money to build the computing capacity it needs.
• OpenAI’s $20 billion change in reported revenue appears to come from a difference in accounting methods. The key question is whether Oracle’s spending starts turning into revenue it can bill customers for.

Oracle (ORCL) has lost 54% of its stock value over the past year. Still, 80% of the analysts who follow the company recommend buying its shares, according to figures collected by CNN.

Investors who are optimistic about Oracle point to its large order book. In its latest quarter, Oracle had $638 billion in signed contracts to provide computing capacity. Its revenue for the year ending in May 2026 was $67.4 billion.

Steve Eisman, the investor who became famous through The Big Short, looked at those same contracts and focused on one customer. Here is what he said on The Compound and Friends on October 16:

“Oracle is much worse because half of Oracle’s backlog is just OpenAI.”

Half of $638 billion is about $320 billion. That is money tied to just one private company.

One customer, a lot of building

Eisman began by telling a story from his time at Oppenheimer in the 1990s. A software analyst there refused to help a fast-growing company go public because it had only two customers. She explained her concern this way: “if one of those customers goes away that’s the end of the company.”

Oracle has many more than two customers. Eisman’s point is that Oracle depends more heavily on OpenAI than larger cloud companies such as Microsoft (MSFT) do. He estimates that Anthropic and OpenAI together account for 70% of the big cloud providers’ AI revenue. AI revenue, in turn, makes up roughly 25% to 30% of their total cloud revenue. Microsoft and similar companies sell many other services, which reduces their dependence on these AI customers. Eisman estimates that OpenAI alone accounts for half of Oracle’s backlog.

Wall Street’s forecasts depend heavily on those signed contracts. Analysts expect Oracle’s revenue to nearly double in two years, rising from $67.4 billion in fiscal 2026 to $132 billion in fiscal 2028.

These 39 analysts expect Oracle to turn its backlog into revenue on schedule. According to Eisman, OpenAI accounts for half of those contracts.

The $20 billion that went missing

This is where the numbers become concerning. Eisman also said:

“last week OpenAI came out and said that their annualized revenue at the end of September was 50 billion. A month ago they said 70. What happened to 20? Where’d the 20 go?”

If Eisman’s figures are correct, OpenAI’s share of Oracle’s backlog alone is worth more than six years of OpenAI’s current revenue.

Mostly accounting, but the bills are the same size

To be fair to OpenAI, the $20 billion probably did not disappear. The Financial Times first reported the $50 billion figure on October 8. A person familiar with the matter told CNBC that the widely reported figure of $68 billion included revenue earned by OpenAI’s partners, counted as part of the total. This made the figure easier to compare with Anthropic’s revenue. The same person said OpenAI reported 77% growth in its annualized revenue rate during the third quarter.

So demand has not fallen. But $50 billion is the revenue OpenAI actually records, and it must pay Oracle using that money or money from investors. OpenAI raised $122 billion in March, and its chief financial officer, Sarah Friar, told CNBC that the company is still “very well capitalized,” meaning it has plenty of financial resources.

Liaquat Ahamed, the Pulitzer Prize-winning author of Lords of Finance, believes funding is the weak point. On Prof G Markets, he was asked how a crash in the AI industry might happen. He replied:

“One of the major players will face financing problems. Will it be Oracle? Will it be OpenAI?”

Oracle is the one borrowing

Oracle is already carrying a lot of debt to pay for its expansion. Its free cash flow fell from $11.8 billion in fiscal 2024 to negative $23.7 billion in fiscal 2026. Free cash flow is the money a company has left after paying for its operating needs and investments.

The figures for the past 12 months look even worse. Oracle spent $75.7 billion on capital projects and received $46.9 billion in cash from its operations. That left a gap of nearly $29 billion.

Oracle has borrowed money to cover this gap. Its total debt has more than doubled since fiscal 2022, reaching $167 billion. The company added $58 billion in debt in fiscal 2026 alone.

Investors have noticed these problems. Ted Mortonson, a technology market strategist at Baird, said on Bloomberg Surveillance on October 15 that his clients were moving toward “anything with strong free cash flow.” He added:

“The names that don’t have free cash flow like Oracle or NBIS or CoreWeave in this area is just being thrown out at this point.”

Oracle’s growth is an OpenAI bet

If Eisman is right that OpenAI accounts for half of Oracle’s backlog, Oracle’s growth depends on OpenAI raising more money and growing enough to meet commitments worth several times its current revenue. At the same time, Oracle is paying for its expansion with borrowed money. The 80% of analysts who recommend buying Oracle shares are focusing on its signed contracts. I would rather focus on the cash. Right now, too much depends on one customer, while Oracle faces a yearly cash shortfall of about $29 billion.

Of course, if OpenAI keeps growing at anything close to the 77% growth rate it reported for the third quarter, those commitments could become much easier to manage. Oracle’s next quarterly report will show whether its spending is turning into revenue that it can bill customers for. That is the number to watch.

So what is Oracle stock actually worth?

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Please note that TIKR’s articles are not financial or investment advice from TIKR or its content team. They are not recommendations to buy or sell any stocks. Our articles use investment data from TIKR Terminal and estimates from analysts. Our analysis may not include recent company news or important updates. TIKR does not own positions in any of the stocks mentioned. Thank you for reading, and happy investing!