Oracle Rises After Cloud Revenues Beat Thanks To Massive CapEx, Soaring Debt

Oracle Rises After Cloud Revenues Beat Thanks To Massive CapEx, Soaring Debt

Earnings season may be over, but the occasional earnings reports are still trickling through, and moments ago we got the latest off-season report from the most indebted company in AI, Oracle, which reported adjusted revenue for the first quarter that beat the average analyst estimate, and which helped push the stock higher, but just barely above where it opened. 

Here's what ORCL reported moments ago for its fiscal first quarter:

Adjusted revenue $19.35 billion, +30% y/y, beating estimates of $19.13 billion 

Cloud Infrastructure revenue (IaaS) $7.39 billion vs. $3.3 billion y/y, beating estimates of $7.19 billion
Software revenue $5.55 billion, -3% y/y, missing estimates of $5.67 billion
Hardware revenue $774 million, +16% y/y, beatring estimate $671.1 million
Service revenue $1.41 billion, +4.8% y/y, estimate $1.38 billion
Software Support revenue $4.90 billion, -1.2% y/y, beating estimates of $4.88 billion
Software License revenue $655 million, -14% y/y, missing estimates $718.8 million


Adjusted operating income $8.15 billion, +31% y/y, beating estimates of $7.81 billion
Adjusted operating margin 42% vs. 42% y/y, beating estimates of 40.8%
 
Adjusted EPS $1.92 vs. $1.47 y/y, beating estimates estimate $1.75 
 
CapEx $28.5BN, Exp. 22.3BN
Oracle's cloud computing revenue growth topped analysts’ estimates, suggesting the company’s large AI data center projects are helping boost its financial results. Of note, sales in the cloud infrastructure business jumped 121% to $7.4 billion, above the median estimate of $7.19 billion, however this was all on the back of far greater capex spending (see below). As a reminder, this is the hockeystock the company projected for its Cloud Infra Revenue a year ago. Good luck with that.

The financial highlights visually:

A breakdown of ORCL's cloud revenue: the growth rates while material, are well below some of its largest - and far less indebted - peers.

Looking ahead, the company projects EPS to be between $1.83 and $1.91 in constant currency and between $1.85 and $1.93 in USD, which represents growth of 19% to 23% in constant currency and 21% to 25% in USD (excluding a one-time gain from Q2 FY2026.)

Including the investment gain, Q2 FY27 non-GAAP EPS is expected to decline between -19% and -15% in constant currency and decline between -18% and -14% in USD.

For the full fiscal year 2027, Oracle expects total revenue to be at least $90 billion (up 34% in constant currency), and non-GAAP EPS to be at $8.10 (up 18% in constant currency).

While we doubt the market will give it much credit for its RPO, especially since it comes with so much massive off-balance sheet debt, that if one were to actually look at how it is funded, the stock would crater, 

The bigger question is when will ORCL's massive capex convert into actual revenues...

... and more importantly cash flow, as the company continues to burn billions every quarter and is forced to fund itself with ever greater amounts of equity sales and debt. 

ORCL also said it completed an earlier-announced plan to sell $20 billion of equity from time to time at market value. Ahead of Thursday’s earnings, several analysts had raised questions about the timing of the at-the-market equity sale. 

Oracle, traditionally a boring provider of database software, has refashioned itself as a provider of computing power for artificial intelligence work and is embarking on a major build-out of data centers for OpenAI and other customers. It has done so by spending massive amount of capital and taking on even more massive amounts of debt as its cash flow is deeply negative. 

Wall Street is watching the scale of spending on these ambitious projects and how quickly Oracle can complete them. The company said it added 850 megawatts of data center capacity in the quarter.

In response to the beat, ORCL shares gained modestly, rising 4% in extended trading after closing at $152.94, sliding sharply into the earnings. In other words, the stock is now where it closed yesterday.

The stock had dropped 38% since its June 1 high for the year on concerns over financing needs, rising component costs and news reports on data center construction challenges, wrote Derrick Wood, an analyst at TD Cowen, ahead of the results.

And since there is little indication the cash burn will end any time soon, buying ORCL CDS here appears like the far more prudent thing to do than buying the stock and praying...

Tyler Durden
Thu, 09/10/2026 - 16:46