Investing.com -- Oracle is set to report fiscal first-quarter 2027 earnings after the market close on Thursday, in a print that will show whether the AI spending boom can outrun the company’s own soaring costs. The cloud computing giant’s backlog has swelled to $638 billion, up 363% from a year ago, while free cash flow has now been negative for five straight quarters.

The company is the clearest publicly traded proxy for the AI infrastructure buildout, with its Oracle Cloud Infrastructure (OCI) unit competing directly with Amazon Web Services, Microsoft Azure, and Google Cloud for AI workloads. Tonight’s numbers will test whether cloud growth can keep pace with Oracle’s mounting capital costs.

Wall Street expects adjusted earnings of $1.74 a share on revenue of $19.14 billion, implying roughly 28% year-over-year growth, according to FactSet data. Management has guided for total cloud revenue growth of 58% to 64%, and Jefferies analyst Brent Thill sees OCI accelerating to as much as 115%, up from 93% last quarter.

Mizuho Securities, which rates the stock Outperform with a $320 target, said it expects Oracle to beat consensus as roughly 1 gigawatt of new OCI capacity comes online this quarter, nearly matching all of fiscal 2026’s buildout. "The key is not just backlog growth, but evidence that capacity is turning into revenue on schedule," the firm said.

Oracle shares closed at $161.63 on Wednesday, down roughly 20% over the past three months and more than 50% off their September 2025 peak. Options markets imply an 11% post-earnings swing, calmer than the stock’s 16% average move over the past four quarters.

The backlog is both Oracle’s best asset and its biggest question mark. Remaining performance obligations rose to $638 billion from $553 billion last quarter, but roughly half reportedly ties to a single customer, OpenAI. "The bad thing is that, to fund their ambition they’ve now had free cash flow burn five quarters in a row," said Paul Meeks of Freedom Capital Markets.

Oracle posted negative free cash flow of $23.7 billion in fiscal 2026 despite record operating cash flow of $32 billion, as capex more than doubled to $55.6 billion. Fiscal 2027 net capex is guided at $70 billion to $95 billion. Mizuho expects free cash flow to turn positive in fiscal 2029, "shifting the narrative from financing risk to cash generation."

Investors will also watch for any change to Oracle’s guidance on converting roughly 12% of backlog into revenue over the next year, and unconfirmed reports of workforce cuts of 7,000 to 10,000 employees. A beat on OCI growth could signal the cash-burn trough is near; a miss, or another capex hike, risks extending a selloff that has already erased a third of Oracle’s market value from its peak.