For Oracle, the AI boom is driving unprecedented order growth. For investors, the more pressing question is: how much additional investment will the company need to fulfill these orders?
$Oracle (ORCL.US)$ Delivered better-than-expected results for the fourth fiscal quarter. Driven by artificial intelligence-related demand, the company reported strong growth in revenue, profit, and order backlog, while maintaining its fiscal 2027 revenue target of $90 billion and raising its full-year profit outlook.
Nevertheless, the company’s shares plunged more than 10% following the opening of U.S. stock markets today.
According to earnings data, for the quarter ended May 31, Oracle’s revenue rose 21% year-over-year to $19.18 billion, exceeding the $19.1 billion consensus estimate from LSEG-surveyed analysts; adjusted earnings per share (EPS) came in at $2.03, above the expected $1.96. FactSet data showed adjusted EPS reached $2.11, a 24% increase from the prior-year period.
Net income increased to $4.22 billion from $3.43 billion a year earlier, with EPS rising from $1.19 to $1.45. The company projected adjusted EPS of $1.72 to $1.76 for the first quarter of fiscal year 2027, with revenue growth of 27% to 29% year-over-year—also ahead of market expectations.
Cloud services were the primary driver of this growth. Cloud revenue surged 47% year-over-year to $9.91 billion during the quarter, with cloud infrastructure revenue soaring 93% to $5.8 billion—a further acceleration compared to the previous quarter.
OpenAI orders drive record-high contract backlog
As AI clients continue to ramp up investments, Oracle has seen substantial growth in its signed but unfulfilled order book.
As of May 31, the company’s remaining performance obligations (RPO) stood at $638 billion, a 363% year-over-year increase and well above the market expectation of $595.67 billion, representing an addition of $85 billion over the past three months.
Oracle stated that RPO growth in the third and fourth quarters was primarily driven by large-scale artificial intelligence contracts. In these arrangements, customers either prepay funds for Oracle to procure GPUs or purchase GPUs themselves and entrust Oracle with deployment—thereby alleviating part of the capital burden Oracle would otherwise bear in building data centers.
Analysts at Bank of America (BAC.N) indicated that more than 50% of the RPO stems from OpenAI. Previously, Oracle disclosed a five-year, $300 billion cloud services agreement with OpenAI, which has become a key pillar supporting the company’s AI business expansion.
Clay Magouyrk, Executive Vice President of Oracle Cloud Infrastructure, stated that the company plans to add nearly 1 gigawatt of computing capacity this quarter, roughly equivalent to the total新增 capacity for the entire fiscal year 2026.
Massive capital expenditures have raised market concerns
Despite strong financial performance, investors are more focused on Oracle’s rapidly growing funding requirements.
The company said it will raise $40 billion through debt and equity financing going forward, including a previously announced $20 billion stock offering. In the just-concluded fiscal year 2026, Oracle already raised $43 billion through debt financing and completed $5 billion in equity financing.
To meet surging demand for cloud computing, the company continues to ramp up data center investments. Capital expenditures for fiscal year 2026 surged 162% year-over-year to $55.7 billion, resulting in a net free cash outflow of $23.7 billion for the year, while depreciation expenses nearly doubled to $7.62 billion.
Hilary Maxson, the newly appointed Chief Financial Officer, indicated that actual cash outflows related to capital expenditures in fiscal year 2027 are expected to be approximately $70 billion, though this figure does not yet account for customer prepayments or certain timing differences.
During the quarter, Related Digital and Blackstone (BX.N) announced the completion of financing arrangements for Oracle’s $16 billion data center project in Michigan.
Earnings exceeded expectations, but the stock price declined.
Market skepticism about whether artificial intelligence demand can sustain such massive investments over the long term has become the primary reason for downward pressure on the stock price following the earnings release.
Gil Luria, an analyst at D.A. Davidson, described the results as “mixed.” Raimo Lenschow, an analyst at Barclays (BCS.N), noted that the earnings report contained “many interwoven factors,” suggesting a relatively muted market reaction.
However, Renshaw believes that the company's revenue growth rate for fiscal year 2027 is expected to accelerate further to approximately 30%, up from around 20% in fiscal year 2026, with earnings expectations also revised upward, while the bulk of new financing pressures will be concentrated in later periods.
As of Wednesday's market close, Oracle's stock price has risen by approximately 3% year-to-date in 2026, compared with a roughly 6% gain in the S&P 500 over the same period. The company's share price had declined by as much as 60% from its peak reached in September last year but has since rebounded more than 80% after hitting a bottom in February this year.
Editor/Lambor