Oracle Beats Estimates as AI Backlog Hits $664 Billion
Synopsis
Oracle tops Wall Street estimates with strong AI-driven growth, easing investor concerns over cash burn as its revenue backlog surges to $664 billion.
Key Highlights
- Oracle beats quarterly estimates of Wall St.
- Revenue backlog at Oracle climbed to $664 billion, compared with analysts’ expectation of $639.89 billion.
- Oracle upped its fiscal 2027 adjusted earnings outlook to a range of $8.10 per share.
Oracle exceeded Wall Street targets in its most recent quarterly results released on Thursday and detailed a smaller than expected cash burn that reassured investors about AI investment returns due to significant balance sheet conservation.
Shares of the company, which tumbled over 21% this year on end, rose 4% in extended trading after Oracle posted a sizeable rise in revenue backlog, an important forward-looking indicator of future growth in revenues. Driven by growing COGS as companies extend cloud footprints, Oracle continues to see steadfast demand for its AI-driven technology services.
Demand for AI devices feature a big backlog growth
Oracle secured contracts to its AI cloud of over $30 billion in its fiscal first quarter, bringing Oracle’s revenue backlog to $664 billion, ahead of analysts’ expectations for a figure of about $639.89 billion, according to data from Visible Alpha.
Oracle’s finance chief said, however, that most of the newly contracted revenue would not involve huge cash up-front payments for chips, allowing the company to stick with its annual spending target of $90 billion to $95 billion. New orders are largely generated through prepayment arrangements or customer furnished hardware which means these do not call for investment from Oracle. The company also said it saw good backlog conversion into revenue in the quarter, which drove its cloud infrastructure results. The database giant predicts approximately 50% of its existing backlog will convert to sales over the next three years.
A stronger balance sheet relaxes capital spending fears
Oracle’s stock has been under pressure this year as investors are becoming increasingly focused on rising capital expenditure and their impact on free cash flow. Oracle’s credit rating in July was cut by S&P Global, which pointed to weak cash flow and rising business risk. Investors are also worried about Oracle’s Stargate project as well, with delays in AI infrastructure buildout tied to labor, permitting and power availability issues.
Still, Oracle burned through less cash than expected, posting free cash flow of negative $5.40 billion versus the $9.56 billion in the red analysts estimated, according to LSEG data. This cash burn was higher than in the prior quarter, but below the significant negative free cash flow of $11.48 billion reported in its second-quarter fiscal 2026 report.
In its Q1, Oracle disclosed it spent $28.50 billion on capital expenditure and approximately $11.36 billion of that was offset by prepayments from customers.
Strong Financial Performance
Oracle revenue for the first quarter rose 30% to $19.3 billion and beat expectations of $19.14 billion The company reported adjusted earnings of US$1.92 a share, compared to consensus estimates that called for US$1.74. The move also raised the company’s fiscal 2027 adjusted earnings guidance to$8.10 a share vs$8.05 previously, disposing of average analyst decisions of.$8.07 per share. Oracle says it’ll exceed $90 billion in annual revenue.
Source: Reuters
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