Overview
Oracle
ORCL · NYSEQ1 FY2027Enterprise Software · Cloud Infrastructure
Since the Report − 14.3%
Revenue grew 30.0% year over year, EPS beat the estimate by 10.0%; the stock rose 6.1% in its first reaction.
- RevenueQ1
- $19.35B
- ▲ 30% YoY · Expected $19.14B
- Cloud Infrastructure Revenue
- $7.4B
- ▲ 121% YoY
Verdict
BUYOracle posted $19.35 billion in first-quarter revenue, cloud infrastructure revenue more than doubled to $7.4 billion, and adjusted earnings per share came in 10% above expectations. In the same quarter, capital spending on data centers hit $28.5 billion — $1.48 for every $1 of revenue — and free cash flow swung to negative $5 billion. The stock fell 5.38% during the session, then rose 6% after hours, returning to where it had closed the day before.
Close on Report DaySep 10
$152.94▲ 6.1%Report-Day Move
- Market Cap(Today)
- ≈ $398 B
- 1Y Return(At Report)
- − 37%
- P/E(At Today's Price · $6.38 · Trailing 12M)
- 20.6
- PEG(Forward 3-year)
- 0.76
- Net Margin(Trailing 12M)
- 26.4%
Earnings Summary
In 30 Seconds- Revenue rose 30% to $19.35B; adjusted EPS of $1.92 beat the estimate by 10%.
- Cloud infrastructure revenue grew 121% to $7.39B, but $28.5B of quarterly capex pushed free cash flow to −$5.4B.
- Shares fell 5.4% in the session before the report, then rose 6% after hours; the market is focused on how the spending gets financed.
The Numbers
Adjusted Earnings Per Share
$1.92
10% Above Expectations
Order Book
$664B
▲ $209B YoY
Quarterly Capital Expenditure
$28.5B
1.5x Revenue
Free Cash Flow
-$5B
Operating Cash $23B
Quarterly Revenue ($ Billion)
14.93
Q1 26 · $14.9 B
16.06
Q2 26 · $16.1 B · QoQ + 7.6%
17.19
Q3 26 · $17.2 B · QoQ + 7.0%
19.18
Q4 26 · $19.2 B · QoQ + 11.6%
19.35
Q1 27 · $19.3 B · QoQ + 0.8% · YoY + 29.6%
20.9-21.5
Q2 27E · 20.9-21.5 · QoQ + 9.6% · YoY + 32.0%
- Q1 26
- Q2 26
- Q3 26
- Q4 26
- Q1 27
- Q2 27E
Q2 FY2027 Company Guidance
- Revenue Growth30% – 34%30%34%
Midpoint 32% · Market Expectation $21.2 BillionIn Line ✓
- Adjusted Earnings Per Share1.85 – 1.93 $1.85 $1.93 $
Midpoint 1.89 · Market Expectation 1.89Exactly In Line ✓
- Cloud Revenue Growth65% – 71%65%71%
62% Delivered This QuarterAccelerating 6.0 pts ▲
- Capital Expenditure (Fiscal Year)90 – 95 billion90 billion95 billion
Net Cash Outflow Capped at $70 BillionUnchanged
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±7.2% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Cloud Infrastructure (IaaS)$7.39 BShare 38.2%▲ 121.0% YoY
- Software (License and Support)$5.55 BShare 28.7%▼ 3.0% YoY
- Cloud Applications (SaaS)$4.22 BShare 21.8%▲ 10.0% YoY
- Services$1.41 BShare 7.3%▲ 5.0% YoY
- Hardware$774 MShare 4.0%▲ 15.0% YoY
Key Metrics
Operating Cash Flow
$23.1 B
▲ 184.0% YoYPress Release
Total Cloud Revenue
$11.6 B
▲ 62.0% YoYPress Release
Software License Revenue
$655 M
▼ 15.0% YoYPress Release
Software Support Revenue
$4.90 B
▼ 1.0% YoYPress Release
Shares are computed over the segment total: $19.3 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“In a world where demand exceeds supply, prices go up rather than down.”
- Demand Exceeds Supply
- Supplier Financing
- 97.9% GPU Utilisation
Summary and Review
Summary
In the quarter ended August 31, Oracle's revenue reached $19.35 billion, up 30% year over year. The market had expected $19.14 billion. Adjusted earnings per share came in at $1.92 versus the $1.74 expected. Cloud infrastructure revenue rose 121% to $7.4 billion and by itself accounted for 38% of quarterly revenue. Total cloud revenue grew 62% to $11.6 billion. Software license and support, the forty-year-old core of the company, held at $5.5 billion and shrank 3%.
The stock fell 5.38% during the session to close at $152.94. The numbers landed five minutes later, and the shares rose 6% after hours to $161.63 — the previous day's close. A quarter that beat on every line was worth practically nothing. The market's attention is on what the figures cost. Oracle spent $28.5 billion on capital expenditure in the quarter. Operations generated a record $23 billion in cash, yet free cash flow turned negative by $5 billion.
Every measure beat expectations. Next-quarter guidance matches the market, and full-year adjusted earnings guidance was raised to $8.10. The open question is financing. Management says growth is not tied to Oracle's own cash, citing supplier financing and customer-bought hardware. It also expects margins to stay flat for the next couple of years. The stock trades 37% below a year ago. This quarter is not strong enough to reverse that, but nothing in it breaks the thesis.
Full Review
Cloud infrastructure is now the main business.
Cloud infrastructure revenue rose to $7.4 billion, up 121% year over year. Growth accelerated from 93% the previous quarter. That single line now accounts for 38% of quarterly revenue, up from 22% a year ago. Total cloud revenue grew 62% to $11.6 billion. Over the same period software license and support fell 3% to $5.5 billion. Of five revenue lines only one is shrinking, and it is the business the company was built on. Oracle now makes more money renting computers than selling software. That shift is not cheap in margin terms. A license is almost pure profit. A rented computer has to be bought first.
The order book holds seven and a half years of work.
Signed but undelivered work reached $664 billion, up from $455 billion a year ago. That is $209 billion added in twelve months. The company's revenue guidance for this fiscal year is at least $90 billion. At the current pace the backlog would take roughly seven and a half years to work through. The quarterly addition slowed sharply, however. Only $26 billion was added this quarter versus $85 billion the quarter before. Management says about half of the backlog should convert to revenue over the next thirty-six months. As the order book grows, so does the bill for the buildings, chips and power that will fulfil it. December's report will show whether the slowdown was a one-off or the new level.
The bill arrives before the promise.
An order book shows future revenue. The buildings, chips and power that produce that revenue are paid for immediately after signature. Quarterly capital expenditure was $28.5 billion, roughly 1.5 times the total revenue booked in the same quarter. That is $1.48 of capital spending for every $1 of revenue. Cash from operations hit a record $23 billion. Even so, free cash flow turned negative by $5 billion. Total debt stood at $125.3 billion at quarter end. The company kept its full-year capital expenditure guidance at $90-95 billion. It says net cash outflow will not exceed $70 billion. The gap comes from supplier financing and arrangements in which customers buy the hardware themselves.
Management is trying to decouple growth from cash.
The earnings call was less about the numbers than about how they are financed. Co-CEO Clay Magouyrk said Oracle has invested in supplier relationships and invented new business models. Direct capital expenditure, he argued, should therefore be decoupled from how fast the business can grow. In management's view, growth is not tied to Oracle's own cash. More than $30 billion of AI contracts were signed in the first quarter without additional capital from Oracle. Finance added that each project generates free cash close to its post-tax operating profit shortly after ramp-up. Management also said the hardware is not sitting idle. GPU utilisation ran at 97.9% through the quarter. This structure has not yet been tested through a full cycle.
Margins are flattening out.
Adjusted operating margin held at 42%. The company expects it to stay flat for the next couple of years. That is a direct statement about the quality of the growth. If revenue grows 30% while margin stands still, the new revenue earns less per unit than the old. Rented compute structurally carries a lower margin than a sold license. None of this is a surprise, and management is not hiding it. But it means investors should expect volume growth rather than margin expansion in the coming years. The stock trades 37% below where it stood a year ago; this quarter is not strong enough to reverse that. Two lines to watch in December: whether adjusted margin holds around 42%, and the quarterly addition to the order book.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Cloud infrastructure revenue rose 121% to $7.4 billion, accelerating from 93% the previous quarter.
- The order book reached $664 billion, with $209 billion added over twelve months.
- Adjusted earnings per share of $1.92 came in 10% above expectations, and revenue beat as well.
- Full-year guidance was raisedAt least $90 billion in revenue and $8.10 in adjusted earnings per share.
- Cash from operations hit a record $23 billionGPU utilisation ran at 97.9%.
- More than $30 billion of AI contracts were signed in the first quarter without additional capital.
Risks
6- Free cash flow turned negative by $5 billionQuarterly capital spending was about 1.5 times revenue.
- Total debt reached $125.3 billion while the $90-95 billion investment programme continues.
- The quarterly addition to the order book fell from $85 billion to $26 billion.
- The company expects margins to stay flat for the next couple of years.
- Software license and support shrank 3% to $5.5 billion.
- Growth is financed through supplier and customer arrangements that have not yet been tested through a full cycle.
What to Watch
4- December 2026Second-quarter results — revenue growth guided at 30-34%, market expectation $21.2 billion.
- December 2026The quarterly addition to the order book — whether the $26 billion pace holds.
- Through fiscal 2027Whether the $90-95 billion investment programme can keep net cash outflow at $70 billion.
- Coming quarters: a test of the guidance that adjusted margins stay flat around 42%.
Upcoming Earnings
To Understand This