Oracle earnings show slower cash burn as AI spending starts to pay off; stock jumps 4% after market

요약

Oracle’s latest earnings offered investors relief as stronger-than-expected revenue and a smaller cash burn eased concerns over its heavy AI spending. The company’s revenue backlog surged to $664 billion, while customer prepayments helped fund capital expendi…

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Oracle earnings show slower cash burn as AI spending starts to pay off; stock jumps 4% after market<br>

Oracle Corp topped Wall Street estimates for quarterly results as it reported a smaller-than-expected cash burn, giving investors fresh confidence that its aggressive AI investments are beginning to generate returns without putting excessive pressure on its balance sheet.

Shares of the company, which have slumped more than 21% this year, rose 4% in extended trading after Oracle reported a sharp jump in its revenue backlog, a key indicator of future growth prospects.

Oracle’s strong demand for cloud computing

Oracle is riding strong demand for its cloud computing services as enterprises ramp up spending on artificial intelligence. Its push to expand its data centre footprint is also helping it secure larger enterprise contracts.

In the first fiscal quarter, Oracle booked more than $30 billion in additional AI cloud contracts, lifting its revenue backlog to $664 billion. The figure topped analysts’ estimate of $639.89 billion, according to a Reuters report.

More importantly for investors, Oracle said most of the newly contracted revenue would not require large cash outlays for chips, allowing the company to maintain its annual spending target of $90 billion to $95 billion.
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“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,” the company’s finance chief, Hilary Maxson, said in a media briefing.

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

Oracle expects around half of its current backlog to convert into sales within the next 36 months.

“The AI ROI story just got real for Oracle and its customers. Strong results mean Oracle's customers are voting with their wallets, and Oracle needs to continue to push the narrative that backlog growth isn't just an OpenAI story anymore,” Reuters cited Rebecca Wettemann, CEO of Valoir, a technology research and advisory firm.

Cash burn allays concerts

Oracle’s stock has taken a beating this year as investors grew increasingly concerned about soaring capital expenditure and its impact on free cash flow. In July, S&P Global downgraded Oracle’s credit rating, citing weak cash flow and rising business risk.

Against that backdrop, Oracle’s latest cash-flow numbers offered some relief. The company reported negative free cash flow of $5.40 billion, significantly better than analysts’ expectation of negative free cash flow of $9.56 billion, according to data from LSEG.

While the cash burn was higher than in the previous quarter, it remained well below the negative free cash flow of $11.48 billion reported in the third quarter of fiscal 2026.

Oracle reported capital expenditure of $28.50 billion in the first quarter, but highlighted that around $11.36 billion of that spending was covered by customer prepayments.

Oracle’s first-quarter revenue rose 30% to $19.3 billion, beating estimates of $19.14 billion. Adjusted earnings of $1.92 per share also topped expectations of $1.74.

The company raised its fiscal 2027 adjusted earnings forecast to $8.10 per share from $8.05. Analysts on average expected annual profit of $8.07 per share.

Oracle also forecast annual revenue of at least $90 billion.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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