Oracle's cloud revenue more than doubles as AI backlog swells to $664 billion

Oracle Corp. reported fiscal first-quarter results after Wall Street's close on Thursday that beat analyst expectations on both revenue and profit, driven by rapid growth in the cloud computing infrastructure business that has become central to the company's role as a supplier of computing power to the artificial intelligence industry. Shares rose as much as 7% in after-hours trading, reversing a decline earlier in the regular session, after the company said quarterly revenue climbed 30% and raised its outlook for the current fiscal year.

The results, covering the quarter ended Aug. 31 and detailed in a quarterly earnings report filed with the Securities and Exchange Commission, show Oracle's multiyear shift from a seller of database software into a builder of data centers for artificial intelligence firms such as OpenAI increasingly showing up in its top line, even as questions persist about how the company is financing that expansion.

The numbers

Total revenue reached $19.3 billion, up 30% from a year earlier and above Wall Street's consensus estimate of roughly $19.1 billion, Oracle said in its earnings release. Adjusted earnings came to $1.92 a share, ahead of analysts' $1.74 forecast, while profit calculated under standard accounting rules rose 60% to $4.7 billion.

• Cloud infrastructure revenue: $7.4 billion, up 121%
• Total cloud revenue: $11.6 billion, up 62%
• Legacy software license revenue: $5.5 billion, down 3%
• Remaining performance obligations (contracted backlog): $664 billion, up $209 billion from a year ago
• New AI cloud contracts signed in the quarter: more than $30 billion

The growth came at a steep cost. Capital expenditures totaled $28.5 billion for the quarter, more than triple the $8.5 billion Oracle spent a year earlier, leaving free cash flow negative by roughly $5 billion even as operating cash flow rose 184% to $23 billion. Oracle raised $20 billion through a common-stock sale program during the quarter and declared a quarterly dividend of 50 cents a share, payable Oct. 23. For the full fiscal year, the company raised its guidance to at least $90 billion in revenue and $8.10 in adjusted earnings per share, and it forecast second-quarter cloud revenue growth of 64% to 70%.

A costly bet on AI infrastructure

The results land a year after Oracle restructured its leadership, elevating Clay Magouyrk and Mike Sicilia to co-chief executive roles and moving longtime CEO Safra Catz into the role of executive vice chair of the board, with founder Larry Ellison remaining chairman and chief technology officer. Since then, the company has aggressively expanded its Oracle Cloud Infrastructure business, anchored by the Stargate data center venture built in partnership with OpenAI, to compete with Amazon, Microsoft and Google for AI computing workloads.

That expansion has come almost entirely on borrowed money. Oracle carried nearly $130 billion in debt at the close of its last fiscal year, and S&P Global Ratings downgraded Oracle's credit one notch to BBB-minus in July, one step above junk status, citing the scale of its infrastructure spending and the concentration of its backlog in a single customer — OpenAI accounts for roughly half of Oracle's contracted obligations. The stock fell as much as 28% over the following weeks and touched a 52-week low near $121.50 before Thursday's report. Analysts have projected that capital spending could climb further still: a BNP Paribas estimate cited in coverage of Oracle's expanding Stargate commitments put fiscal 2027 capex as high as $80 billion to $100 billion, well above the roughly $60 billion Wall Street had penciled in earlier this year.

Who is watching the results

Thursday's numbers matter well beyond Oracle's own shareholders. OpenAI's ability to fund its side of the Stargate arrangement remains central to whether Oracle's backlog converts into cash rather than merely growing on paper; the artificial intelligence company completed a large funding round earlier this year that Oracle has pointed to as evidence customer commitments are backed by real capital. Nvidia, whose newest-generation processors are being installed across Oracle's expanding data center footprint, stands to benefit from continued spending, as do the banks and bondholders financing Oracle's buildout, who have grown more selective about backing new Stargate-related projects. Rival cloud providers Amazon Web Services, Microsoft Azure and Google Cloud face a competitor whose infrastructure revenue growth rate now outpaces their own, at least for this quarter. Enterprise customers migrating databases and business applications to the cloud, meanwhile, are watching a legacy software business that shrank 3% even as the newer cloud lines surged.

Executives framed the quarter as evidence the buildout is translating into delivered capacity rather than just signed contracts. Oracle said it brought 850 megawatts of new data center capacity online and delivered more than 300,000 graphics processing units to AI cloud customers during the quarter, nearly triple what it shipped in the prior three months. Co-chief executives Sicilia and Magouyrk, who joined the earnings call alongside chief financial officer Hilary Maxson, pointed to that delivery pace as the clearest sign that Oracle's infrastructure investment is keeping up with demand from AI developers rather than falling behind it, a concern that has dogged the stock since the credit downgrade.

What happens next

Oracle's own guidance suggests the growth rate has further to run: the company forecast cloud revenue growth accelerating to as much as 70% in the current quarter, faster than the 62% just reported. That would require sustaining, or increasing, the capital spending pace that has already pushed free cash flow negative and drawn rating-agency scrutiny, and investors will be watching whether Oracle returns to equity and debt markets again before the fiscal year is out, following the $20 billion stock sale completed this quarter and a $5 billion preferred-stock issuance earlier in the year. Several Stargate sites beyond the original Abilene, Texas, campus are expected to begin initial deliveries in the second half of this year or early next, which should provide the next concrete test of whether contracted backlog is converting into revenue on schedule. Credit rating agencies are likely to revisit Oracle's outlook as more of that spending and the associated debt shows up on the balance sheet in coming quarters.