Oracle Beats Revenue Estimates on AI Demand, Raises Profit Forecast Despite High Spending
Oracle reported first-quarter revenue of US$19.3 billion, exceeding Wall Street expectations due to strong enterprise AI demand. The company raised its fiscal 2027 profit forecast and projected at least US$90 billion in revenue, though capital expenditures significantly surpassed analyst estimates.
Oracle topped Wall Street expectations for first-quarter revenue on Thursday, reporting a 30 per cent increase to US$19.3 billion. This figure exceeded the analysts’ average estimate of US$19.14 billion, driven by robust demand for cloud computing services from surging enterprise spending on artificial intelligence.
In response to the positive results, Oracle lifted its annual profit forecast. The company now expects adjusted earnings per share of US$8.10 for fiscal 2027, up from its prior forecast of US$8.05. Analysts had previously anticipated an annual profit of US$8.07 per share. Additionally, Oracle projected revenue of at least US$90 billion for the same period.
For the upcoming second quarter, the company forecasts a revenue jump between 30 per cent and 34 per cent, with adjusted profit expected to range between US$1.85 and US$1.93 per share.
Despite these optimistic projections, Oracle’s financial performance has been marked by significant investment costs. Capital expenditure for the first quarter reached US$28.50 billion, including about US$18 billion in net cash outlay. This amount was substantially higher than the US$19.38 billion analysts had expected. The heavy spending reflects ongoing investments in data centre capacity, with Oracle bringing 850 megawatts online during the June-August quarter.
The company’s revenue backlog stood at US$664 billion at the end of the first fiscal quarter, an increase from US$638 billion in the prior three months. This figure also surpassed the Visible Alpha analyst estimate of US$639.89 billion. Oracle finance chief Hilary Maxson stated that most newly contracted revenue in the first quarter would not require large cash outlays for chips, as orders were secured via prepay or bring-your-own-hardware mechanics.
Investor sentiment regarding Oracle has been mixed earlier in the year. Shares had fallen more than 20 per cent due to concerns over high capital expenditures and pressure on free cash flow. In July, S&P Global downgraded Oracle’s credit rating, citing weak cash flow and rising business risk. Investors have also expressed worry about the Stargate project amid reports of build-out delays tied to labour, permitting approvals, and power availability.
However, following the report, shares rose nearly 7 per cent in extended trading. The company also secured a deal worth nearly $7 billion from the U.S. Pentagon to consolidate software licences, further bolstering its contract portfolio.