Oracle Corp (NYSE:ORCL, XETRA:ORC) shares fell around 12% on Thursday after quarterly results drew investor scrutiny over the company's aggressive capital spending plans, even as a record backlog and strong cloud infrastructure growth pointed to durable demand for its AI buildout.
The stock dropped despite beats on revenue and earnings. Total revenue rose 21% year over year to $19.18 billion, edging past the Street's $19.1 billion estimate, while non-GAAP EPS of $2.11 topped consensus of around $1.97. Operating margin of 44.8% also cleared expectations.
The headline that overshadowed those results: Oracle said it expects to raise roughly $40 billion through debt and equity in fiscal 2027, including a $20 billion at-the-market equity program, as it races to build out AI data center capacity at scale. Reported capital expenditures for the year are guided at $90 billion to $95 billion, with net cash outlays of approximately $70 billion after accounting for $20 billion to $25 billion in customer prepayments and bring-your-own-hardware arrangements.
Remaining performance obligations reached $638 billion, up 363% year over year and $85 billion above the prior quarter, well ahead of the Street's $595.7 billion estimate. Oracle Cloud Infrastructure revenue grew 93% year over year to $5.8 billion, accelerating from the prior period and ahead of consensus.
Softness in cloud applications tempered the picture. Cloud SaaS revenue grew 9% year over year in constant currency, decelerating two points sequentially and missing estimates of around 12%, keeping concerns about AI's displacement of traditional software demand in the conversation.
Oracle reiterated fiscal 2027 revenue guidance of $90 billion, implying roughly 34% year-over-year growth, with first-quarter cloud revenue guided to grow 57% to 63% in constant currency. The unchanged top-line guide disappointed investors who had anticipated an upward revision given the scale of the backlog.
Bank of America reiterated a Buy rating and $240 price objective, writing that the SaaS softness was noise relative to the underlying infrastructure ramp. The firm noted that IaaS now represents 58% of cloud revenue, up from 44% a year ago, and said it expects revenue growth to accelerate from roughly 17% in fiscal 2026 to 32% and 47% in fiscal 2027 and 2028, respectively, though it models free cash flow remaining negative through fiscal 2029.
Jefferies also maintained a Buy with a $320 price target, calling the after-hours decline overdone while acknowledging the debate around RPO-to-revenue conversion. The firm flagged that the prior quarter saw revenue beat consensus by more than $300 million, compared with just $81 million this quarter, and trimmed its fiscal 2027 EPS estimate by 3%.
Wedbush kept its Outperform rating but cut its price target to $240 from $275, citing the market's negative reaction to the additional debt load. The firm called the capital raise the necessary cost of delivering on a record backlog and said prepayment structures and customer-supplied hardware reduce Oracle's net financing burden relative to the scale of capacity being built.
Oracle delivered more than 1.2 gigawatts of data center capacity to customers in fiscal 2026 and said it expects to deliver nearly 1 gigawatt in the first quarter of fiscal 2027 alone, a sharp acceleration in build cadence. The company noted that its Abilene facility is expected to grow from 42% to 77% of total capacity within 90 days.