Oracle’s quarterly revenue beats estimates as AI boom boosts cloud demand

Oracle ORCL-N topped Wall Street expectations for first-quarter revenue on Thursday and lifted its annual profit forecast, boosted by strong demand for its cloud computing services from surging enterprise spending on AI.

Shares of the company, which have fallen more than 20 per cent this year, rose nearly 7 per cent in extended trading.

The upbeat report indicates that Oracle’s heavy investment in data centres is bearing fruit, helping it secure more enterprise contracts.

Oracle’s revenue backlog stood at US$664-billion at the end of the first fiscal quarter, up from US$638-billion in the prior three months, while analysts estimated US$639.89-billion, according to data from Visible Alpha.

In a media briefing, Oracle finance chief Hilary Maxson said most of the newly contracted revenue in the first quarter will not require large cash outlays for chips.

“The vast majority of those orders were via prepay or bring-your-own-hardware or a similar mechanic, so they don’t require incremental capital from Oracle,” Maxson said.

“And we started to see a strong conversion of our (backlog) into revenues this quarter, driving our cloud infrastructure results.”

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Oracle’s stock has taken a beating this year on growing investor concerns over soaring capital expenditure that has pressured its free cash flow. In July, S&P Global downgraded Oracle’s credit rating citing weak cash flow and rising business risk.

Investors have also been worried about Oracle’s Stargate project amid reported build-out delays tied to labour, permitting approvals and power availability.

Still, analysts expect Oracle’s revenue to accelerate sharply as it expands its data centre footprint. The company said it brought 850 megawatts of capacity online in the June-August quarter.

The company reported capital expenditure of US$28.50-billion in the first quarter, including about US$18-billion in net cash outlay. Analysts were expecting capital spending of US$19.38-billion.

Oracle’s first-quarter revenue rose 30 per cent to US$19.3-billion, compared with analysts’ average estimate of US$19.14-billion, according to data compiled by LSEG.

The company expects adjusted earnings per share of US$8.10 for fiscal 2027, compared with its prior forecast of US$8.05. Analysts on average expect annual profit of US$8.07 per share. It forecast revenue of at least US$90-billion for fiscal 2027.

For the second quarter, Oracle expects a 30 per cent to 34 per cent jump in revenue, and adjusted profit between US$1.85 and US$1.93 per share, both in line with market expectations.