Oracle beats quarterly forecasts as AI demand doubles cloud sales

Oracle has beaten Wall Street expectations with a 30 per cent rise in quarterly revenue, driven by a massive surge in its cloud infrastructure division as the artificial intelligence boom continues.

For the three months ending 31 August, the database and software pioneer brought in $19.35 billion in revenue, ahead of the $19.14 billion analysts had predicted. Adjusted earnings per share arrived at $1.92, comfortably ahead of the expected $1.74.

The engine of this growth is Oracle’s cloud infrastructure business, where revenue more than doubled, climbing 121 per cent to $7.4 billion. Total cloud revenue, which includes business software, reached $11.61 billion.

But building the physical architecture to power the AI era is an incredibly expensive pursuit. Oracle’s capital spending skyrocketed to $28.5 billion during the quarter, compared to just $8.5 billion in the same period last year.

To fund this immense building programme, the company completed a $20 billion stock sale in the quarter. It is a necessary cash injection; Oracle holds a weaker cash position than its larger tech rivals and is currently carrying $125 billion in debt. This intense investment cycle pushed its quarterly free cash flow to negative $5.4 billion, down from negative $362 million a year ago. Oracle's official results rounded this free cash flow figure to negative $5 billion.

Where the money is going

Oracle is racing to build out physical capacity as fast as possible. During the quarter, the company delivered 850 megawatts of data centre capacity and shipped more than 300,000 graphics processing units (GPUs) to its AI customers—almost three times the capacity it delivered in the previous quarter.

Demand is still outstripping supply. The company signed more than $30 billion in new AI cloud contracts during the quarter. That helped push its total remaining performance obligations—the backlog of contracted work yet to be recognised as revenue—to a massive $664 billion.

Among those deals is a major new public sector contract. Oracle secured a deal with the Pentagon worth up to $7 billion over the next decade.

Development delays and future outlook

Investors have been closely watching for signs of bottlenecks in Oracle’s construction plans. Reports had recently circulated that a natural gas pipeline serving a key data centre in New Mexico was running behind schedule.

However, during a briefing with reporters, Oracle’s Chief Financial Officer Hilary Maxson downplayed those concerns. She stated that nothing the company knows today suggests the New Mexico site, or any others, are delayed compared to their internal schedules. Clay Magouyrk, an executive at the company, added on a conference call that Oracle is currently working on securing an air permit for the New Mexico facility.

The company is confident enough in its momentum to issue strong forecasts. Oracle projects full-year revenue for fiscal 2027 to reach at least $90 billion, with adjusted earnings of $8.10 per share. For the second quarter, it expects revenue to grow by 30 to 34 per cent.