Oracle revenue surges, but heavy AI spending prompts investor concern

Oracle posted a strong close to its fiscal year, with fourth-quarter revenue climbing 21% to US$19.2 billion — slightly ahead of analyst expectations — driven by near-doubling growth in its cloud infrastructure division. Yet shares fell roughly 5% in after-hours trading as investors focused on a capital spending bill that came in higher than the company had previously projected.

Bookings surge, but spending overshoots target

Capex for the quarter ending May 31 reached approximately US$16.5 billion, bringing the full-year total to US$55.7 billion and exceeding Oracle's own US$50 billion projection. CFO Hilary Maxson said on the post-earnings call that the company expects to spend around US$70 billion in net capex in fiscal 2027, with the reported figure likely US$20–25 billion higher due to prepayments for certain components.

To fund the expansion, Oracle raised US$43 billion in debt and US$5 billion in equity during the fiscal year just ended, and plans to raise a further US$40 billion in fiscal 2027 — including US$20 billion through an at-the-market share sale program.

Analysts flag execution risk despite record backlog

Remaining performance obligations — a closely watched measure of contracted future revenue — jumped to US$638 billion at quarter-end, well above the US$589.5 billion average analyst estimate. Bloomberg Intelligence said the US$85 billion sequential increase "confirms our view of rising demand for AI infrastructure." Still, it cautioned that the sharp rise "will likely lead to greater funding needs," resulting in more equity dilution and increased debt.

Vital Knowledge offered a similarly measured read, describing the results as "an OK release with continued robust growth in backlog and cash performance that wasn't as bad as feared," while noting that Oracle "is still facing a period of heavy cash outflows as it builds the infrastructure needed to fulfill its backlog." The research firm also flagged the absence of raised full-year sales guidance as "a disappointment."

Cloud growth leads, restructuring boosts margins

Cloud infrastructure revenue grew 93% to US$5.8 billion in the quarter, marginally ahead of the 91% growth analysts had anticipated. Total cloud revenue, including software applications, is forecast to rise around 61% in the August quarter — just short of the analyst consensus of 62%. For the first quarter of fiscal 2027, Oracle guided for total revenue growth of 27–29%.

Earnings per share came in at US$2.11, beating the average estimate of US$1.97. Bloomberg Intelligence noted that adjusted operating margin exceeded expectations, driven primarily by lower operating costs. Beginning in March, Oracle cut thousands of workers across the company, spending US$1.8 billion on restructuring during the fiscal year — nearly five times the prior year's total. Several analysts said the moves were likely to boost margins and help offset the massive data center spending.

OpenAI build-out advances

Oracle has repositioned itself from a database software vendor into a provider of computing infrastructure for artificial intelligence (AI), with OpenAI its most significant customer. Co-CEO Clay Magouyrk said on the earnings call that large data centers for OpenAI are seeing "significant progress," with 42% of capacity delivered at its flagship site in Abilene, Texas, and a further 35% expected over the next three months.

Most of the new bookings in the quarter were for large-scale AI contracts in which customers prepaid for the expensive servers required for the work. Oracle said this arrangement "substantially reduces the amount of capital Oracle must raise to build out our AI data centers." TD Cowen analyst Derrick Wood noted that the stock had climbed 35% over the prior three months, likely driven by improved investor sentiment toward computing providers and OpenAI.

Source: Oracle, June 2026

Source: Oracle, June 2026

Article edited by Jack Wu