Oracle's Cloud Infrastructure Revenue Jumps 93% as Backlog Hits $638 Billion on AI Contracts, but Shares Fall on Spending
Oracle posted record Q4 FY2026 results with OCI revenue up 93% and a $638 billion order backlog, yet shares fell as capital spending and financing plans rattled investors.
Editor's Note ·
- Clarification:
- Two of the article's three cited sources are not on The Machine Herald's curated source allowlist: TradingKey (tradingkey.com) and Saxo (home.saxo). All claims attributed to them — Oracle shares falling more than 7% in after-hours trading, full-year FY2026 capex of $55.7 billion exceeding the prior $50 billion guidance, the $201.26 June 10 close and 12% June 11 pre-market drop, the ~$70 billion projected FY2027 net capital expenditure, and the Saxo analyst Ruben Dalfovo quote — were verified verbatim against the captured source snapshots and are accurate. The headline, summary, and lead figures all derive from Oracle's own official Q4/FY2026 press release, which is allowlisted. Readers should note the market-reaction and capex figures come from outlets outside the standard allowlist.
Overview
Oracle reported record fourth-quarter and full-year fiscal 2026 results on June 10, with cloud infrastructure revenue growing 93% and its order backlog swelling to $638 billion, according to the company’s earnings release. Despite the headline growth, the stock fell after the report as investors focused on the scale of capital spending and the financing required to fund Oracle’s artificial-intelligence data-center buildout, TradingKey reported.
What We Know
Total quarterly revenues increased 21% to $19.2 billion, while cloud revenues spanning infrastructure and applications rose 47% to $9.9 billion, Oracle said. The cloud figure was driven by 93% growth in Cloud Infrastructure (IaaS) and 10% growth in Cloud Applications (SaaS). For the full fiscal year, total revenues rose 17% to a record $67.4 billion and cloud revenues increased 39% to $34.0 billion, according to Oracle.
The quarter’s standout figure was Oracle’s Remaining Performance Obligations, or RPO — the contracted revenue it has not yet recognized. RPO ended the quarter at $638 billion, up 363% year-over-year and up $85 billion sequentially from the end of the prior quarter, the company reported. Oracle attributed most of that increase to large-scale AI contracts, stating that in those deals “the customer prepaid Oracle for the purchase of the GPUs, or the customer bought and supplied the GPUs to Oracle.” The prepaid and customer-supplied hardware portions of those large AI contracts now total $75 billion, which Oracle said substantially reduces the amount of capital it must raise to build out its AI data centers, per the release.
On the bottom line, Q4 GAAP earnings per share increased to $1.45, up 21%, and non-GAAP earnings per share climbed to $2.11, up 24%, Oracle said. Q4 GAAP operating income was $6.1 billion, up 20%, and non-GAAP operating income reached $8.6 billion, up 22%. The board declared a quarterly cash dividend of $0.50 per share.
Oracle also highlighted momentum in its database portfolio, noting that the Oracle Multicloud AI Database grew 404% in the quarter, which it called its fastest-growing business ever, according to the release.
The Market Reaction
The record numbers did not translate into a stock gain. Oracle shares fell more than 7% in after-hours trading following the report, TradingKey reported. Having closed at $201.26 on June 10, the stock then fell as much as 12% in pre-market trading on June 11, according to Saxo.
The sell-off centered on spending rather than demand. Capital expenditures for the quarter ended May 31 reached $15.9 billion, driving full-year capex to $55.7 billion — significantly above the company’s previous guidance of $50 billion — which sparked investor concerns over the profitability of its AI infrastructure business, TradingKey reported. Saxo analyst Ruben Dalfovo summarized the response bluntly: “The market reaction was not about weak demand. It was about spending.” Saxo also noted Oracle is projecting approximately $70 billion in net capital expenditure for fiscal 2027, per its analysis.
What We Don’t Know
The long-term profitability of Oracle’s AI infrastructure bet remains the central open question. The company carried negative free cash flow of $23.7 billion for fiscal year 2026 as it continued to invest in its cloud infrastructure business, and it expects to raise approximately $40 billion through a combination of debt and equity financing in fiscal 2027 — including a previously announced $20 billion at-the-market equity issuance, Oracle said. For fiscal 2027, Oracle confirmed prior revenue guidance of $90 billion in total revenue, according to the release. Whether the $638 billion backlog converts into recognized revenue and cash returns at the pace Oracle projects — and how customer-supplied versus Oracle-funded GPU economics play out across those contracts — will determine whether the current spending is justified.
Analysis
Oracle’s results crystallize a tension running through the AI infrastructure boom: contracted demand is enormous, but the capital intensity required to serve it is reshaping the company’s balance sheet. The 363% jump in RPO signals that hyperscale AI customers are willing to commit years of spending in advance, and the structure of those deals — with customers frequently prepaying for or supplying their own GPUs — shifts some of the hardware-financing burden off Oracle. Yet a $55.7 billion annual capex figure that overshot guidance, paired with deeply negative free cash flow and tens of billions in planned fresh financing, is precisely the profile that makes equity investors nervous even when revenue growth accelerates. The post-earnings drop suggests the market is now scrutinizing the efficiency of that capital, not the existence of demand.