Oracle's quarterly revenue beats estimates as AI boom drives cloud demand

Sept 10 — Oracle 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% this year, rose nearly ‌7% in extended trading.

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

Oracle's revenue backlog stood ​at $664 billion at the end of the first ⁠fiscal quarter, up from $638 billion in the prior three months, while analysts estimated $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."

CONCERNS OVER RISING CAPITAL SPENDING

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 labor, permitting approvals and power availability.

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

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

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

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

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

(Reporting by Deborah Sophia in Bengaluru; Editing by ​Arun Koyyur)

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