"AI inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, interpreting medical diagnostic images and laboratory results, automating laboratories, placing bets in financial markets, automating legal processes, automating financial processes, automating sales processes. AI inferencing will be much larger than the AI training market." - Lawrence Ellison
Oracle delivered a solid start to FY2026 (Q1) with total revenue of $14.9 billion, up 11% year over year, led by a 27% increase in total cloud revenue to $7.2 billion and a cloud infrastructure growth surge of 54% to $3.3 billion. The company highlighted a record-level remaining performance obligations (RPO) backlog of $455 billion, up 359% YoY and up $317 billion versus the prior quarter, signaling a substantial pipeline of revenue to convert over the next several years. Management underscored AI-driven demand, a fast-accelerating OCI platform, and the strategic alignment of database, AI inference, and applications as core to the growth thesis. Currency dynamics and one-time tax effects contributed to an EPS mix: non-GAAP EPS of $1.47 vs GAAP EPS of $1.01, with a non-GAAP tax rate of 20.5%. For FY2026, Oracle maintained a 16% constant-currency revenue growth target and signaled aggressive longer-range cloud infrastructure expansion, including a 77% OCI growth to $18B in the current fiscal year and a multi-year plan that scales to well in excess of $100B in OCI-related revenue in the coming years. In addition, the company outlined a capital expenditure (CapEx) plan of approximately $35B for the year to support data-center capacity and capacity‑driven revenue acceleration. While the near-term cash flow profile shows free cash flow negative in the quarter and for the trailing four quarters, Oracle emphasizes an assets-light model for cloud delivery and rapid revenue ramp with fast acceptance of deployed capacity. The combination of AI-first platform dynamics, integrated cloud/software stack, and flexible delivery options (cloud, cloud-at-customer, or dedicated regions) positions Oracle to capitalize on a secular AI inflection, albeit with execution and capital allocation as critical near-term levers for sustained profitability and free cash flow growth.
Key Performance Indicators
Revenue
14.93B
QoQ: 5.63% | YoY:4.47%
Gross Profit
14.51B
97.19% margin
QoQ: 46.01% | YoY:50.77%
Operating Income
4.28B
QoQ: -1.86% | YoY:-12.34%
Net Income
2.93B
QoQ: -0.31% | YoY:-6.90%
EPS
1.04
QoQ: -0.95% | YoY:-8.77%
Revenue Trend
Margin Analysis
Key Insights
Total revenue: $14.9B, up 11% YoY (YoY growth in line with the best-available industry expectations for a transitioning software/cloud company).
Cloud revenue: $7.2B, up 27% YoY; Cloud infrastructure revenue: $3.3B, up 54% YoY; OCI consumption revenue up 57% YoY; Cloud database services up 32% YoY; Autonomous Database up 43% YoY; Multi-cloud database revenue up 1,529% YoY (noting base effects from small prior-period base).
Cloud applications: $3.8B, up 10%; Back-office applications: $2.4B, up 16%.
Total software revenue: $5.7B, down 2% YoY; Total revenue mix reinforces cloud within software ecosystem.
Operating performance: Operating income $4.28B; EBITDA $4.70B; Net income $2.93B; Net income margin around 19.6% (per reported metrics).
Financial Highlights
Revenue and profitability highlights:
- Total revenue: $14.9B, up 11% YoY (YoY growth in line with the best-available industry expectations for a transitioning software/cloud company).
- Cloud revenue: $7.2B, up 27% YoY; Cloud infrastructure revenue: $3.3B, up 54% YoY; OCI consumption revenue up 57% YoY; Cloud database services up 32% YoY; Autonomous Database up 43% YoY; Multi-cloud database revenue up 1,529% YoY (noting base effects from small prior-period base).
- Cloud applications: $3.8B, up 10%; Back-office applications: $2.4B, up 16%.
- Total software revenue: $5.7B, down 2% YoY; Total revenue mix reinforces cloud within software ecosystem.
- Operating performance: Operating income $4.28B; EBITDA $4.70B; Net income $2.93B; Net income margin around 19.6% (per reported metrics).
- EPS: Non-GAAP $1.47; GAAP $1.01; diluted EPS $1.01; Non-GAAP tax rate 20.5%, which contributed to a reduction in reported EPS by about $0.03.
- Operating cash flow: $8.14B in Q1; Free cash flow: -$0.36B in Q1; Four-quarter operating cash flow up 13% to $21.5B; CapEx in the quarter: $8.5B; YTD capitalization supports capacity expansion.
- Balance sheet and liquidity: Cash and cash equivalents around $11B at quarter end; short-term deferred revenue about $12B; total cash/near-cash position roughly $11B; quarterly buybacks of 440k shares for $95M; quarterly dividend of $0.50; total CapEx guidance for FY2026 around $35B. RPO remains a leading indicator of durable revenue trajectory.
- Leverage and capital allocation: Cloud-first strategy with asset-light operating model for some components, and a significant CapEx plan to support data-center expansion; Oracle highlighted favorable financing terms from GPU/networking suppliers and a deliberate balance between capacity deployment and revenue realization.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
14.93B
4.47%
5.63%
Gross Profit
14.51B
50.77%
46.01%
Operating Income
4.28B
-12.34%
-1.86%
Net Income
2.93B
-6.90%
-0.31%
EPS
1.04
-8.77%
-0.95%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management commentary underscores a strategic pivot toward AI-driven cloud and database platforms, with integrated capabilities across infrastructure and applications:
- AI inferencing opportunity: Lawrence Ellison emphasized that AI inferencing is expected to be larger than the AI training market, supported by vectorized enterprise data and diverse external LLMs (e.g., OpenAI, Gemini, Grok, Lama) accessed via Oracle Cloud. This frames Oracle as a critical data custodian enabling secure, private AI reasoning across enterprise data and public data sources.
- AI database and data fabric: Ellison described vectorization of data and seamless linking to LLMs as a differentiator, enabling customers to query enterprise data securely and obtain well-reasoned answers. The AI database is presented as a cornerstone for multi-LLM access and private/public data fusion.
- Private cloud and cloud-at-customer flexibility: Oracle highlighted a butterfly private-cloud concept enabling an Oracle Cloud-like experience in a compact footprint (three racks for ~$6M), with customers such as Vodafone considering dedicated regions or cloud-at-customer deployments; this reinforces Oracle’s differentiated go-to-market with flexible delivery models at compelling economics.
- Application generation via AI: Management flagged the development of AI-generated application components and workflow-integrated AI agents, positioning Oracle as both an infrastructure provider and an application generator—potentially lowering the cost of building and integrating enterprise applications at scale.
- Capex discipline and rapid revenue recognition: Catz emphasized a capital-expenditure cadence that deploys capacity only as needed and revenue starts flow immediately upon acceptance, illustrating a capital-light operating model that accelerates cash conversion and reduces idle capacity risk.
AI inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, interpreting medical diagnostic images and laboratory results, automating laboratories, placing bets in financial markets, automating legal processes, automating financial processes, automating sales processes. AI inferencing will be much larger than the AI training market.
— Lawrence Ellison
CapEx looks like it's going to be about $35 billion for this fiscal year.
— Safra Catz
Forward Guidance
Near-term outlook and execution points:
- Q2 guidance (non-GAAP): Total revenue growth 12%-14% in constant currency; 1% plus positive currency impact on revenue; Total cloud revenue growth 32%-36% in constant currency; 33%-37% in USD terms; Non-GAAP EPS growth 8%-10% (CC) and USD 10%-12% with a target range of $1.61-$1.65; Tax guidance anchored at a base rate of 19% with potential one-time tax effects.
- FY2026 guidance: Full-year total revenue growth of 16% in constant currency; OCI growth target lifted to support RPO expansion, with expectations of multibillion-dollar customer signings and RPO potentially exceeding $0.5 trillion. Management signals a long-range financial plan update at Oracle AI World in October.
- Cloud infrastructure expansion: OCI is projected to grow 77% to $18B in the current fiscal year and scale to a multi-year trajectory (e.g., $32B, $73B, $114B, $144B in subsequent years), supported by data-center expansion and private-cloud/dedicated-region deployments.
- Capex outlook: approximately $35B for the year to support capacity build-out; capacity deployment is aligned with revenue ramp, with equipment delivered on a just-in-time basis to accelerate revenue realization.
- Key risk considerations: Currency volatility, one-time tax events, supply constraints in GPUs and networking gear, and the pace at which customers adopt AI databases and multi-LLM configurations across private and public clouds. Investors should monitor RPO progression, data-center utilization, and price/volume mix in cloud revenue as signals of the sustainability of Oracle’s AI-driven growth trajectory.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ORCL Focus
97.19%
N/A
N/A
N/A
ADBE
89.10%
37.90%
13.80%
26.40%
PANW
74.10%
13.40%
5.93%
83.95%
CRWD
75.60%
0.75%
1.69%
413.99%
MSFT
69.40%
46.60%
8.57%
32.42%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Oracle's Q1 FY2026 results reinforce a bullish thesis built on AI-enabled data management, scalable GPU-driven cloud infrastructure, and a unique capability to vectorize and securely fuse private enterprise data with publicly available AI models. The $455B RPO backlog suggests a long runway for revenue growth, and management's guidance implies a high-commitment plan to scale OCI to 77% growth in the current year and beyond. The combination of cloud infrastructure growth, AI database capabilities, and a suite-based application strategy creates multiple catalysts for margin expansion as capacity ramps translate into higher utilization and faster revenue recognition. However, investors should monitor the capital intensity and near-term free cash flow headwinds, currency effects, and the pace at which customers adopt the Oracle AI Database and cloud-at-customer offerings. Overall, the long-term earnings power appears robust if Oracle can execute on capacity deployment, preserve pricing discipline, and maintain strong RPO conversion into realized revenue.
Key Investment Factors
Growth Potential
Significant upside from AI inferencing and private/onsite cloud options, with Oracle aiming to convert its $455B RPO backlog into accelerating revenue. The AI database and vectorization capability, combined with access to multiple leading LLMs, positions Oracle to capture enterprise AI workloads across training and inferencing, with higher-margin, high-value AI-inflected revenue streams.
Profitability Risk
Capital expenditure intensity and negative near-term free cash flow (quarterly -$362M; trailing four-quarter FCF -$5.9B) reflect a ramp phase. Execution risk includes integrating AI-generated applications at scale, managing capacity utilization to avoid under- or over-building, and potential competitive pressures from hyperscalers and emerging AI-first incumbents. Currency dynamics and one-time tax events could introduce volatility to reported earnings.
Financial Position
Solid liquidity with roughly $11B in cash/cash equivalents at quarter end; substantial debt load (~$105B) with a large non-current component, and a sizable CapEx program (~$35B for FY2026) that underpins a capacity-driven growth story. Oracle maintains a relatively asset-light cloud-delivery ethos in certain segments and emphasizes rapid revenue recognition upon customer acceptance.
SWOT Analysis
Strengths
Scale and breadth of Oracle's cloud + database + applications stack, enabling end-to-end enterprise solutions.
AI-first strategy with vectorized data, private data privacy, and integration with leading LLMs (OpenAI, Google Gemini, etc.).
Large RPO backlog ($455B) signaling durable revenue visibility and future upside.
Flexible delivery models (public cloud, cloud at customer, dedicated regions) increasing customer lock-in and deployment options.
Operational efficiency in AI-driven workloads and strong GPU/networking scale.
Weaknesses
Near-term free cash flow was negative for the latest quarter and for the trailing four quarters, reflecting heavy CapEx and deployment cadence.
Reliance on AI-driven growth to sustain profitability; execution risk in scaling AI-generated applications.
High absolute leverage and large capital expenditure commitments could pressure balance sheet in slower macro scenarios.
Opportunities
Explosion in AI inferencing demand across industries; Oracle positioned as a private/public data fusion platform for enterprise AI.
Expansion of Oracle AI Database and ecosystem with multiple LLMs; cloud-at-customer and dedicated-region deployments broaden addressable market.
Early mover advantage in vectorized data and secure data collaboration with enterprise data while maintaining privacy.
Threats
Competitive pressure from major hyperscalers (AWS, Microsoft, Google) and AI-first solution providers; potential margin compression in commoditized workloads.
Supply chain constraints for GPUs, networking gear, and data-center infrastructure could slow capacity expansion.
Regulatory, geopolitical, and data sovereignty concerns could impact cloud deployment models and cross-border data flows.