The quarter
Oracle’s cloud infrastructure revenue rose 121% to $7.4 billion in the first quarter of its 2027 fiscal year, the company said on 10 September. Total revenue grew 30% to $19.3 billion, and total cloud revenue, infrastructure plus applications, rose 62% to $11.6 billion.
The rest of the business moved more slowly. Cloud applications grew 10% to $4.2 billion, while software revenue fell 3% to $5.5 billion, which Oracle attributes to customers moving from on-premises software to the cloud. Non-GAAP earnings per share rose 30% to $1.92.
Oracle raised its outlook and now expects revenue of at least $90 billion for fiscal 2027. Chief financial officer Hilary Maxson told analysts on the earnings call that this would be a 34% increase on the previous year.
A $664 billion backlog
Remaining performance obligations, or RPO, reached $664 billion, up $209 billion from a year earlier. RPO is revenue that customers have contracted for but that Oracle has not yet recognised; for Oracle it is mostly multi-year commitments for cloud capacity, which turn into revenue only as data centres are built and handed over. RPO rose $26 billion from the previous quarter, according to Oracle’s earnings presentation as reported by Investing.com.
Oracle said it booked more than $30 billion of additional AI cloud contracts in the quarter, and that demand for AI training and inference “continues to grow faster than supply”. Co-chief executive Clay Magouyrk said GPU utilisation across its fleet was 97.9%.
Who pays for the hardware
How those contracts are structured matters as much as their size. Oracle’s AI buildout needs far more cash than the business generates: capital expenditure was $28.5 billion in the quarter, and free cash flow was negative $5 billion despite a record $23 billion of operating cash flow. During the quarter Oracle also completed a $20 billion sale of common stock through an at-the-market programme, part of a previously announced plan to fund its investment.
Maxson said the “vast majority” of the new contracts were prepay, bring-your-own-hardware or a similar arrangement, and would not require incremental capital from Oracle. In a prepay deal the customer pays up front and Oracle builds with that cash; under bring-your-own-hardware, the customer buys the chips and Oracle operates them. Magouyrk added that Oracle also uses supplier financing that lets it pay for capacity as customers pay Oracle. The release says the new contracts have no incremental impact on Oracle’s plans to raise capital.
That speaks to the central question about Oracle’s strategy: how long it can keep building ahead of revenue. Maxson said net cash capex, after prepayments, was $18 billion in the quarter, and guided to $90 billion to $95 billion of capex for the full year. Investing.com reported that Oracle expects full-year net cash capex of no more than $70 billion.
Capacity coming online
Oracle said it added 850 megawatts of data-centre capacity in the quarter, and that since the end of its fourth quarter it had delivered more than 300,000 GPUs to AI cloud customers, almost triple the capacity delivered in that quarter.
The company also used the results to announce software products, including an AI Data Platform that it says automatically builds an “enterprise ontology” of a customer’s data and processes. On the call, Magouyrk said Oracle had expanded its relationship with OpenAI to offer OpenAI’s API, ChatGPT for work and Codex through Oracle Marketplace.
What to watch
For the second quarter, Oracle guided to revenue growth of 30% to 34% and cloud revenue growth of 65% to 71% in dollars, with non-GAAP earnings per share of $1.85 to $1.93. The backlog is revenue only once capacity is delivered, so the figures to track are megawatts handed over each quarter and whether net cash capex stays inside the $70 billion ceiling. Investing.com reported that the shares, which had closed 5.4% lower on 10 September, rose about 4% in after-hours trading after the results.
