Oracle profit rises on surging cloud revenue as investors focus on AI buildout costs

Oracle reported higher fiscal fourth-quarter profit on a sharp rise in cloud revenue, extending the company’s run of strong AI infrastructure demand while also sharpening investor concern about the cost of expanding that business.

The company said profit rose to $4.3 billion, or $1.45 a share, from $3.43 billion a year earlier. On an adjusted basis, Oracle earned $2.11 a share, topping analyst expectations. Revenue climbed 21% from a year earlier to $19.18 billion.

Cloud revenue rose 47% to $9.9 billion. Within that business, Oracle Cloud Infrastructure revenue jumped 93% to $5.8 billion, while software revenue fell 2% as more customers continued moving to the cloud.

Earnings and growth

The latest quarter reinforced Oracle’s argument that demand for AI infrastructure remains unusually strong. Co-CEO Clay Magouyrk said the demand is extremely large and said Oracle’s OCI business should become highly profitable over time.

The company also pointed to a large pipeline of future business. Remaining performance obligations reached $638 billion, up 363% from a year earlier and $85 billion from the prior quarter, suggesting that customers are committing to long-term cloud capacity.

Oracle guided for revenue growth of 27% to 29% in the current quarter and reaffirmed a fiscal 2027 revenue target of $90 billion.

Spending and financing

Investors, however, focused less on the growth rate than on what it will take to fund it. Oracle said it expects about $70 billion in capital expenditures in fiscal 2027 as it continues building out data centers to support AI and cloud demand.

The company also said it plans to raise about $20 billion in debt and equity financing, on top of a previously disclosed $20 billion equity issuance. That combination highlights how capital-intensive the expansion has become, even as revenue momentum improves.

CFO Hillary Maxson said margins should improve as long-term contractual revenue from data centers is realized. The market reaction suggested that many investors remain unconvinced the near-term cash burden is outweighed by the long-term payoff.

Market reaction

Oracle shares fell in after-hours trading after the results. The decline reflected worries about capital expenditures, financing needs and margin pressure rather than a challenge to the company’s top-line momentum.

That response fit a broader theme in the market: investors continue to reward AI growth, but they are also becoming more selective about how much spending they are willing to accept in exchange for it.

Oracle’s results showed both sides of that tradeoff. The company delivered faster cloud growth, a huge backlog of contracted business and a better-than-expected profit print. At the same time, it outlined a much larger funding requirement to keep expanding the infrastructure behind those numbers.

The central question now is whether Oracle can keep converting AI demand into durable profit faster than the buildout consumes cash. For now, the company is growing quickly. The harder test is whether it can finance that growth without pressuring returns.