Oracle Corp. topped Wall Street's first-quarter forecasts, lifted by rapid growth in its cloud infrastructure unit, and its shares rose about 4% in after-hours trading.
The database company posted earnings before certain costs such as stock compensation of $1.92 per share, ahead of the $1.74 per share analysts had expected. Revenue climbed nearly 30% from a year earlier to $19.35 billion, beating the $19.14 billion consensus estimate. Net income came in at $4.68 billion, up from $2.93 billion in the same quarter a year ago.
Cloud infrastructure, which rents AI servers to enterprise customers, was the standout: sales there jumped 121% year over year to $7.4 billion, ahead of analyst projections, while the rest of Oracle's business grew just 3%. The segment also drives most of Oracle's backlog, now $664 billion, with nearly half of that tied to a single cloud infrastructure contract with OpenAI Group PBC. Oracle's non-OpenAI backlog has more than doubled over the past year, which may reassure investors worried about its exposure to the AI startup.
The results arrive as Oracle pours money into an ambitious data center buildout. Capital expenditures rose to $28.5 billion from $8.5 billion a year earlier, and the company brought 850 megawatts of new data capacity online. Free cash flow was negative $5.4 billion, compared with negative $362 million a year ago, and Oracle carries $125 billion in debt as it competes with hyperscalers such as Amazon Web Services Inc. and Google LLC, which hold stronger cash positions and better credit ratings.
Valoir analyst Rebecca Wettemann said investors still have legitimate concerns about Oracle's rising debt and weak cash flow, adding that the company needed to show demand exists for its data centers and that it can fund that demand amid fluctuating input prices. She said the backlog figure is strong and GPU utilization shows Oracle converting that backlog into recognized revenue. Brian Mulberry, a market strategist at Zacks Investment Management, said Oracle demonstrated it is making the most of its capex and improving operationally by capturing revenue and higher margins, calling it a very strong report that should ease some recent AI concerns.
On a conference call, Chief Financial Officer Hilary Maxson said she was not worried by a Bloomberg report that a natural gas pipeline needed to power a new New Mexico facility was running behind schedule, saying nothing known today suggests New Mexico or other sites are delayed relative to schedules included in the fiscal 27 outlook. Chief Executive Clay Magouyrk said Oracle is also working to secure an essential air permit in New Mexico. Oracle's software business brought in $5.55 billion, down 3% and below the $5.61 billion analysts targeted, though it won a Pentagon contract potentially worth up to $7 billion over a decade covering Oracle software in on-premises data centers used by the U.S. military, the intelligence community and the Coast Guard.
For the current quarter, Oracle targets earnings of $1.85 to $1.93 per share on revenue growth of 30% to 34%. For fiscal 2027, it targets adjusted earnings of $8.10 per share on revenue of at least $90 billion, with capital expenditure guidance unchanged at $90 billion to $95 billion. Even after the after-hours gain, Oracle stock is down 22% this year, while the S&P 500 has gained about 11%.
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