Oracle beats on earnings, but stock drops on plans to raise another $20 billion
Oracle reported better-than-expected earnings and revenue for the fiscal fourth quarter on Wednesday while also raising its profit forecast for the year. The stock dropped 10% in extended trading as the company plans to raise more money to finance its AI buildout.
Here's how the company did in comparison with LSEG consensus:
- Earnings per share: $2.03 adjusted vs. $1.96 expected
- Revenue: $19.18 billion vs. $19.10 billion expected
Revenue increased 21% year over year in the quarter, which ended on May 31, according to a statement. Net income rose to $4.22 billion, or $1.45 per share, from $3.43 billion, or $1.19 per share, a year ago. Adjusted earnings exclude impact of stock-based compensation.
The company maintained its previous revenue guidance of $90 billion for the 2027 fiscal year, while lifting its forecast of adjusted earnings per share to $8.05. Analysts were projecting $8.01 per share and $88.9 billion in revenue.
Oracle said it foresees raising $40 billion through debt and equity financing, including a $20 billion share sale it announced earlier. That's after raising $43 billion in debt and $5 billion in equity in fiscal 2026, a move that concerned investors due to uncertainty about whether demand for artificial intelligence can justify that much new capital.
For the fiscal year, Oracle reported $23.7 billion in negative free cash flow, with depreciation nearly doubling to $7.62 billion. Capital expenditures jumped 162% to $55.7 billion.
The company called for $1.72 to $1.76 in adjusted earnings per share for the fiscal first quarter, with 27% to 29% revenue growth. Analysts polled by LSEG had been expecting $1.68 in adjusted earnings per share, along with $19.06 billion in revenue, implying about 28% growth.
Revenue from cloud offerings increased 47% in the quarter to $9.91 billion. Analysts polled by StreetAccount had expected $9.97 billion. Software revenue, including licenses and support, totaled $6.82 billion, down 2% but above StreetAccount's $6.93 billion consensus.
Cloud infrastructure revenue jumped 93% to $5.8 billion. Amazon Web Services, the leader in the market, generated $37.59 billion in revenue in the March quarter.
Oracle's remaining performance obligation, including revenue that hasn't been recognized, reached $638 billion on May 31, up 363%. Analysts polled by StreetAccount had been looking for $595.67 billion.
"Most of the RPO increase in both Q3 and Q4 were large scale AI contracts where the customer prepaid Oracle for the purchase of the GPUs, or the customer bought and supplied the GPUs to Oracle," the company said in the statement, referring to graphics processing units.
The two mechanisms lower the sum Oracle will need for data center construction, the company said.
Bank of America analysts, who recommend buying Oracle shares, said over 50% of the remaining performance obligation comes from OpenAI.
The company is looking to bring online almost one gigawatt worth of computing power in the current quarter, roughly the total for fiscal 2026, Oracle CEO Clay Magouyrk said on a conference call with analysts.
During the quarter, Oracle hired Schneider Electric executive Hilary Maxson to be its new chief financial officer. Related Digital and Blackstone said they secured funding for a $16 billion Oracle data center site in Michigan.
Oracle's net cash outlay for capital expenditures in fiscal 2027 will be around $70 billion, excluding $20 billion to $25 billion in prepayments from customers and timing impact, Maxson said.
As of Wednesday's close, the stock was up 3% so far in 2026, while the S&P 500 had gained 6% in the same period.
CNBC
