Oracle beat Wall Street expectations with quarterly revenue of $19.3 billion as demand for artificial intelligence infrastructure boosted its order backlog, while lower-than-expected cash burn eased some concerns about the cost of expanding its computing capacity.
Shares advanced nearly 4 % in after-hours trading, the move coming after the company showed new signs of growth in its cloud computing business and explained how it is funding some of the investments needed to meet the demand for AI.
Oracle raises its backlog to $664 billion due to AI demand
During the first fiscal quarter, Oracle secured more than $30 billion in new contracts, IA in the cloud, Oracle’s backlog of pending revenue reached $664 billion, compared to the $639.89 billion forecast by analysts. This expansion also reflects the increase in enterprise spending on artificial intelligence, is expanding its data center infrastructure to meet this demand and secure new corporate contracts related to cloud services.
The company expects to convert approximately half of its current order backlog into sales over the next 36 months. This forecast makes the backlog a key indicator of future growth for its cloud infrastructure business, furthermore, Oracle began observing a higher conversion rate of these backlogs into revenue during the quarter. This trend directly contributed to the performance of its cloud infrastructure.
Customers help finance infrastructure expansion
However, the growing demand for AI implies significant computing infrastructure needs, the difference lies in how Oracle is financing some of that capacity, as Chief Financial Officer Hilary Maxson explained: a large portion of new orders utilizes prepayments, hardware provided by the customers themselves, or other mechanisms that reduce Oracle’s need for additional capital.
Thus, the company can maintain its annual spending target of between $90 billion and $95 billion despite the rapid growth of AI-related contracts. Recorded capital expenditures of $28.5 billion during the quarter. Of that amount, approximately $11.36 billion was covered by advance payments from customers.
This model may be especially relevant for the expansion of data centers this allows for increased capacity for AI workloads without shifting the entire initial cost to Oracle’s balance sheet.
Oracle reduces pressure on its cash flow
On the other hand, the high capital expenditure had generated concern among investors, Oracle’s shares had fallen by more than 21 % during the year amid doubts about the impact of infrastructure investments on its free cash flow. In July, S&P Global lowered the company’s credit rating due to weak cash flow and increased business risk. Doubts had also arisen surrounding Stargate due to the challenges associated with labor, permits, and energy availability for developing AI infrastructure.
The latest results offered a different signal, with Oracle reporting a negative free cash flow of $5.4 billion compared to the $9.56 billion negative expected by the market. Although the figure still reflects significant cash burn, it was considerably lower than the $11.48 billion negative recorded during the third quarter of fiscal year 2026.
Oracle’s revenue grows by 30%
Likewise, operating results exceeded expectations. First-quarter revenue increased 30% to $19.3 billion, compared to a forecast of $19.14 billion, and adjusted earnings reached $1.92 per share, surpassing analysts’ expectations of $1.74.
Following these results, slightly raised its adjusted earnings forecast for fiscal year 2027 from $8.05 to $8.10 per share. The company also projected annual revenue of at least $90 billion. The performance of the order backlog will now be a key indicator of how much of the strong demand for AI translates into sales. At the same time, advance payments from customers could help Oracle sustain the expansion of its cloud infrastructure with less direct pressure on its cash flow.
Source: Reuters
Photo: Shutterstock
