Pentagon Enterprise Software Award
Oracle has secured a new enterprise software contract with the US Department of Defense under the Defense Department's long-running Enterprise Software Initiative (ESI), a centralized procurement vehicle for commercial information technology across the military, the Coast Guard and parts of the intelligence community. The agreement carries a base value of $3.3 billion over its first five years and could reach $6.9 billion over ten years. Under the framework, eligible DoD organizations and authorized contractors can order Oracle on-premises software, software-as-a-service applications and technical support through standardized task and delivery orders, with specific products, pricing and performance requirements set per ordering organization.
Wisconsin Power Dispute Heads to Court
Separately, Oracle has asked a Wisconsin county judge to overturn a state rule that would require the company to post roughly $7 billion in collateral for its roughly one-gigawatt artificial intelligence data center in Port Washington. The Public Service Commission of Wisconsin declined to reconsider the policy, which sits inside a "very large customer" tariff for We Energies and obliges any developer whose S&P rating falls below A-minus to post cash or a letter of credit reflecting the cost of dedicated power and transmission infrastructure. Oracle's current S&P rating sits below that threshold, and securing the $7 billion letter of credit is estimated to cost the company more than $100 million a year. The facility is part of Oracle's effort to deliver its $300 billion computing commitment to OpenAI. The commission has argued that tariffs should be designed so existing Wisconsin customers do not subsidize data centers, and at least 24 US states have now approved similar "large load tariffs" aimed at protecting ratepayers from hyperscale infrastructure costs.
Stock Pressure and Credit Downgrade
Oracle's shares have come under sustained pressure even as the contract wins mount. After touching a fresh 52-week low last Friday, the stock is down roughly 54 percent from its 2026 high on June 1 and about 65 percent from its peak last September, sliding for three consecutive sessions and shedding roughly 10 percent despite the Pentagon deal. S&P Global Ratings downgraded Oracle's credit to BBB-minus on July 9, one notch above junk, citing the company's rapidly growing AI-related spending. Oracle's five-year credit default swaps have more than quadrupled since mid-2025 to a record about 203 basis points, signaling rising investor concern over default risk.
Nvidia–OpenAI Backstop Report
Adding to the mix, a Wall Street Journal report said Nvidia is in talks to provide a roughly $250 billion backstop to help OpenAI lease a 10-gigawatt data center project being developed by a SoftBank unit in southern Ohio, with power for the site controlled by the US government and funded separately by Japan under a recent trade deal. Oracle's stock rose about 1.4 percent in overnight trading after the report, and retail sentiment on Stocktwits turned bullish, with ORCL the most-discussed ticker. Investor Michael Burry, however, questioned the arrangement as another example of circular financing among AI and cloud companies. Anthropic, Microsoft and Google have also recently discussed access to the site with US Commerce Secretary Howard Lutnick, according to the report.
Backlog, Debt and Conversion Risk
The market reaction reflects unease over how Oracle's order book translates into cash. Remaining performance obligations jumped 363 percent to a record $638 billion at the end of fiscal 2026's fourth quarter (ended May 31), driven heavily by cloud infrastructure revenue that grew 93 percent to $5.8 billion on total revenue of $19.2 billion, up 21 percent year on year. Oracle has guided that only about 12 percent of that backlog will be recognized as revenue over the next 12 months and a further 34 percent in the 24 months after, leaving less than half expected to convert within three years. The company is also carrying more than $122 billion in long-term debt and plans to raise an additional $40 billion through debt and equity to fund further data center builds, leaving investors focused on whether contracted demand materializes quickly enough to justify the leverage.
Next Verifiable Milestones
Key upcoming tests include the Wisconsin court's ruling on Oracle's challenge to the Public Service Commission rule, Oracle's planned $40 billion financing package, and ongoing quarterly tech earnings that could reshape sentiment on AI cloud spending and Oracle's ability to convert its $638 billion backlog into revenue.
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