Oracle beats estimates as AI cloud demand drives growth and eases financing concerns

On March 10, Oracle reported stronger-than-expected fiscal third-quarter results and lifted its long-term revenue outlook, signaling sustained demand for artificial-intelligence cloud infrastructure and easing investor concerns about whether the company could finance its ambitious data-center expansion.

Quarterly results beat expectations

Oracle said revenue for the fiscal third quarter ended February 28 rose 22% year over year to US$17.2 billion, ahead of analyst forecasts of about US$16.9 billion, according to FactSet and LSEG data cited by multiple media outlets.

Adjusted earnings per share reached US$1.79, exceeding Wall Street expectations of about US$1.70, while GAAP net income climbed to US$3.7 billion, or US$1.27 per share, from US$2.94 billion a year earlier.

Operating income rose to US$5.5 billion on a GAAP basis, while non-GAAP operating income reached US$7.4 billion, up 19% from the prior year. Over the past 12 months, operating cash flow totaled US$23.5 billion.

Cloud services remained the primary growth engine. Total cloud revenue rose 44% year over year to US$8.9 billion, while cloud infrastructure sales jumped 84% to US$4.9 billion, faster than the previous quarter's growth pace. The company said demand for AI computing capacity continues to exceed available supply.

By comparison, software revenue grew modestly and was roughly flat in constant currency, while hardware revenue rose slightly and services posted moderate growth.

AI contracts drive record backlog

A key indicator of Oracle's growth pipeline expanded sharply during the quarter. Remaining performance obligations (RPO) — a measure of contracted future revenue — climbed to US$553 billion, more than quadrupling from a year earlier and increasing by US$29 billion from the prior quarter.

The company attributed much of the surge to large AI-related cloud infrastructure contracts. Management said these agreements often include customer prepayments or arrangements in which customers provide their own graphics processing units (GPUs), thereby reducing Oracle's need to fund equipment purchases upfront.

Oracle said this structure allows it to support the rapid expansion of AI data-center capacity without requiring significant additional capital beyond what it has already planned.

Guidance signals continued strong growth

Oracle forecast continued momentum in the current quarter and beyond. For the fiscal fourth quarter 2026, the company expects total revenue to grow 18% to 20% in constant currency, or 19% to 21% in US dollars. Adjusted earnings per share are projected between US$1.96 and US$2.00, roughly in line with or slightly above Wall Street estimates.

For the full fiscal year 2026, Oracle reiterated its revenue expectations of about US$67 billion and capex of US$50 billion. The company also raised its fiscal 2027 revenue forecast to US$90 billion, above analyst estimates of roughly US$86 billion.

Executives said strong demand for AI training and inference infrastructure underpins the longer-term outlook, noting that some major customers have recently strengthened their financial positions, which could support additional cloud spending.

Capital spending and financing concerns

Oracle's aggressive push into AI cloud infrastructure has raised questions in recent months about whether the company could finance the massive capital requirements needed to build data centers.

The company announced in February that it planned to raise to US$50 billion through debt and equity financing to support its expansion. Within days of the announcement, Oracle raised US$30 billion through investment-grade bonds and mandatory convertible preferred stock, with the offering reportedly heavily oversubscribed.

Investors had been concerned that Oracle's AI ambitions could strain its balance sheet, particularly as the company had reported negative free cash flow of more than US$13 billion over the previous 12 months and had significantly less cash on hand than cloud rivals such as Amazon and Microsoft, according to CNBC.

However, the latest results and the company's financing progress appear to have eased some of those worries. Oracle maintained its fiscal-2026 capital spending guidance at US$50 billion even as it increased its long-term revenue outlook, suggesting the company may not need to accelerate spending beyond previously planned levels.

Bloomberg Intelligence analyst Anurag Rana wrote that keeping capital-expenditure guidance unchanged could address concerns about overspending that have weighed on the company and other cloud infrastructure providers.

Analyst and market reaction

The earnings report was generally well-received by investors and analysts. Oracle shares rose roughly 8% to 10% in extended trading after the announcement, according to CNBC and Bloomberg. The positive reaction came after the stock had fallen sharply in recent months amid doubts about the cost and logistics of its AI infrastructure build-out.

Bloomberg Intelligence said the results and outlook helped calm concerns about the company's balance sheet and growth prospects, noting that the combination of strong earnings, a record backlog, and a completed bond deal reinforces visibility into funding for its expansion.

However, analysts cautioned that profitability could face pressure in the near term. Bloomberg Intelligence said the rapid expansion of lower-margin cloud infrastructure services may reduce adjusted operating margins by roughly 100 to 300 basis points over the next 12 months.

Some uncertainties also remain around major AI customers. Bloomberg Intelligence noted that Oracle's strategy of asking some customers to prepay for infrastructure or provide their own GPUs may ease capital needs. Still, questions persist about the long-term funding commitments of partners such as OpenAI.

Strategic shift toward AI infrastructure

Despite those uncertainties, Oracle's latest results underscore the company's transformation from a traditional enterprise software provider into a major AI infrastructure supplier.

The company has secured large contracts with AI developers and enterprises seeking computing capacity for training and deploying models, and has built out large data-center campuses and GPU clusters to support the demand.

Executives said advances in AI-assisted coding are also allowing Oracle to streamline product development, enabling smaller teams to produce software more efficiently.

With demand for AI computing continuing to outpace supply, Oracle said it believes the current growth trajectory could allow it to meet or even exceed its revenue targets for fiscal 2027 and beyond.

Source: Oracle, March 2026

Source: Oracle, March 2026

Article edited by Joseph Chen