Oracle Corporation (ORCL) stunned Wall Street this week, with shares surging nearly 40% despite posting fiscal first-quarter results that fell just shy of expectations.
The software giant reported adjusted earnings of $1.47 per share on revenue of $14.9 billion, both a hair below forecasts. Cloud services revenue grew 27% year over year to $7.2 billion, but came in lighter than analysts had hoped.
Ordinarily, such a performance might have dampened enthusiasm. Instead, investors zeroed in on the company’s future pipeline. Oracle revealed its backlog of contracted work had ballooned 359% year over year to $455 billion. That backlog, known as remaining performance obligations, offers a glimpse of future revenue already locked in. For a company long seen as lagging its cloud peers, the figure signaled a transformative shift.
Betting Big on AI Infrastructure
At the heart of Oracle’s surge is its fast-growing cloud infrastructure business. CEO Safra Catz laid out a striking roadmap: $18 billion in cloud infrastructure revenue expected this fiscal year, scaling to $32 billion in 2027, $73 billion in 2028, $114 billion in 2029, and a staggering $144 billion by fiscal 2030. For context, that’s more than seven times this year’s expected level.
The momentum is being fueled by surging demand for AI computing power. Oracle has signed multi-billion-dollar contracts with industry heavyweights including OpenAI, xAI, Meta (META), NVIDIA (NVDA), and Advanced Micro Devices (AMD). Chairman Larry Ellison highlighted the urgency of the market, recounting a customer who requested “all the capacity you have that’s currently not being used anywhere in the world.”
Oracle’s neutrality in the AI race—providing infrastructure without competing to build its own large models—has also become a key differentiator. Partnerships with Microsoft (MSFT), Google (GOOG), and Amazon (AMZN) allow Oracle’s databases to run across multiple platforms, making it an appealing alternative for enterprises wary of locking into a single provider.
A Capital-Heavy Transformation
The shift to cloud and AI is also reshaping Oracle’s financial profile. Once an asset-light software vendor focused on steady cash flows and buybacks, the company is now investing heavily in new data centers. Capital expenditures are expected to climb to $35 billion in fiscal 2026, compared with just $1.6 billion in 2020.
This pivot has slowed share repurchases and even pushed free cash flow into negative territory in recent quarters. Yet the massive backlog suggests those investments could yield significant returns down the road. Analysts describe Oracle as potentially the most compelling large-cap growth acceleration story in technology today.
Conclusion
Oracle’s first-quarter results may have underwhelmed on the surface, but the company’s contract backlog and aggressive AI-driven cloud roadmap have redefined its narrative. With demand for AI infrastructure surging, Oracle has positioned itself as a key player alongside the biggest names in tech. The near-term trade-off is higher spending and thinner cash flows, but investors are betting that the company’s long-term growth trajectory makes those sacrifices worthwhile.
Oracle’s first-quarter results may have underwhelmed on the surface, but the company’s contract backlog and aggressive AI-driven cloud roadmap have redefined its narrative. With demand for AI infrastructure surging, Oracle has positioned itself as a key player alongside the biggest names in tech. The near-term trade-off is higher spending and thinner cash flows, but investors are betting that the company’s long-term growth trajectory makes those sacrifices worthwhile.
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