EPS of $1.02 increased by 20.7% from previous year
Gross margin of 70.3%
Net income of 2.94B
""We're the destination of choice for both AI training and inferencing. Our Gen 2 cloud is faster and therefore, cheaper than our competitors..."" - Safra Catz
Oracle Corporation (ORCL) Q3 2025 Financial Results: Strong Bookings Drive Sustained Growth in Different Cloud Segments
Executive Summary
Oracle Corporation's Q3 fiscal 2025 results revealed a strong momentum in cloud services, highlighted by a remarkable $48 billion increase in the company's total remaining performance obligations (RPO), now standing at $130 billion. CEOs Safra Catz and Larry Ellison credited this growth to rising demand for Oracle Cloud Infrastructure (OCI) and innovative AI solutions. Year-over-year revenue rose 8% to $14.1 billion, driven primarily by a 51% increase in OCI consumption revenue. The company is well-positioned to continue this growth trajectory, as indicated by substantial investments in cloud capacities and a commitment to leveraging AI capabilities to enhance data processing.
**Operating Income**: $4.358 billion, up 9% YoY, with an operating margin of 44%.
**Net Income**: $2.936 billion, up 22% YoY.
**GAAP EPS**: $1.02, representing a 20% increase from the prior year; Non-GAAP EPS: $1.47, up 4%.
Financial Highlights
- Total Revenue: $14.1 billion, up 8% YoY.
- Gross Profit Margin: 70.3%, reflecting strong operational efficiencies.
- Operating Income: $4.358 billion, up 9% YoY, with an operating margin of 44%.
- Net Income: $2.936 billion, up 22% YoY.
- GAAP EPS: $1.02, representing a 20% increase from the prior year; Non-GAAP EPS: $1.47, up 4%.
- Operating Cash Flow: $5.93 billion, maintaining sound liquidity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
14.13B
6.40%
0.51%
Gross Profit
9.94B
5.57%
-0.39%
Operating Income
4.36B
16.21%
3.27%
Net Income
2.94B
22.28%
-6.82%
EPS
1.05
20.69%
-7.08%
Key Financial Ratios
currentRatio
1.02
grossProfitMargin
70.3%
operatingProfitMargin
30.8%
netProfitMargin
20.8%
returnOnAssets
1.82%
returnOnEquity
17.5%
debtEquityRatio
5.75
operatingCashFlowPerShare
$2.06
freeCashFlowPerShare
$0.02
dividendPayoutRatio
38.1%
priceToBookRatio
28.57
priceEarningsRatio
40.7
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- On bookings: Safra Catz noted, "This was our strongest booking quarter ever by a huge margin as we added $48 billion to our backlog."
- Cloud growth: Catz emphasized that total cloud revenue was up 25%, driven primarily by OCI and AI services: "Demand continues to dramatically outstrip supply."
- Future expectations: she projected confidence in achieving $66 billion in revenue by fiscal year 2026, anticipating continuous acceleration in cloud investments.
- Investment in AI: Ellison outlined, "We are in the process of building a gigantic 64,000 GPU liquid-cooled NVIDIA GB 200 cluster for AI training, reflecting our commitment to leading in this domain."
"We're the destination of choice for both AI training and inferencing. Our Gen 2 cloud is faster and therefore, cheaper than our competitors..."
— Safra Catz
"We now have a clear light of sight to our future revenue growth. We're confident in meeting our $66 billion revenue target for FY '26."
— Safra Catz
Forward Guidance
Management reiterated their optimistic outlook, with Safra Catz forecasting Q4 revenue growth between 9%-11% in constant currency and significant cloud revenue growth in FY '26. This performance will be supported by rising demand for OCI and AI frameworks, positioning Oracle as a leading player in the cloud computing market. Catz's confidence in the RPO suggests strong future revenue recognition and customer loyalty based on extended contracts.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ORCL Focus
70.31%
30.80%
17.50%
40.70%
PANW
72.90%
9.56%
N/A
118.59%
CRWD
74.70%
-5.52%
-0.55%
-1,083.29%
MSFT
68.70%
45.70%
8.02%
27.02%
SQ
37.60%
5.41%
1.42%
36.46%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Oracle's strong fundamentals, increasing market share within cloud infrastructure, and management’s positive outlook, the company demonstrates significant growth potential in the current economic climate focused on digital transformation. Investors should consider Oracle's ability to leverage its existing customer database for AI-driven innovations while keeping an eye on the competitive landscape where agility and strategic investments in infrastructure are paramount.
Key Investment Factors
Growth Potential
Oracle's ongoing transition to AI-driven solutions and enhancements in cloud infrastructure are expected to drive significant growth. The company's strategic focus on larger, longer-term contracts aligns well with market demands. Containing more than $130 billion in RPO signifies a robust future revenue pipeline.
Profitability Risk
The primary risks include reliance on the successful execution of cloud infrastructure expansion and competition from larger hyperscale cloud providers such as AWS and Azure. Additionally, potential supply chain disruptions could affect capacity growth and project implementations.
Financial Position
Strong balance sheet with $17.8 billion in cash and marketable securities and manageable long-term debt of $88.1 billion. The company maintains a current ratio of 1.017, indicating adequate liquidity. High cash reserves support continued investment in cloud technology and shareholder returns.
SWOT Analysis
Strengths
Strong cash flow generation, evidenced by $5.9 billion in operating cash flow this quarter.
Client demand and an increasing backlog indicate robust growth potential with RPO increasing 63% YoY.
Market leadership in cloud infrastructure services, specifically for AI-driven processes.
Weaknesses
High debt levels with a debt-to-equity ratio of 5.75, suggesting potential over-leverage.
Industry competition from established players like Amazon and Microsoft may erode market share if not managed effectively.
Opportunities
Rising popularity of AI solutions provides a substantial growth avenue for Oracle's cloud offerings.
Expansion opportunities in emerging markets and developing cloud regions that enhance service delivery capability.
Threats
Intense competition with large cloud providers like AWS and Azure that may negatively impact pricing and customer retention.
Economic downturns that may affect enterprise spending on IT services.