Oracle FY26 Earnings: Growth & FCF Risks

After U.S. markets closed on June 10, 2026, Oracle released its financial results for the fourth fiscal quarter (ending May 31, 2026) and the full 2026 fiscal year. The earnings report sent shockwaves through the market: the company secured a flood of AI contracts, posted record quarterly revenue, and issued far stronger-than-expected guidance for the upcoming quarter. Yet the market reaction was decidedly mixed, with Oracle’s stock plummeting 10% in after-hours trading.

Key Financial Metrics

Oracle delivered results that beat Wall Street estimates across the board in this quarter.

Fourth Fiscal Quarter Performance

• Total revenue reached $19.2 billion, a year-over-year increase of 21%, surpassing the market consensus forecast of $19.1 billion.
• Non-GAAP operating profit stood at $8.6 billion, rising 22% year over year. Non-GAAP earnings per share (EPS) hit $2.11, up 24% from a year earlier.
• Cloud business (IaaS + SaaS): Total cloud revenue amounted to $9.9 billion, surging 47% year over year. Revenue from core cloud infrastructure (IaaS) jumped 93% year over year to $5.8 billion.

Full-Year Fiscal 2026 Performance

• Full-year total revenue hit a record $67.4 billion, growing 17% year over year.
• Total cloud revenue reached $34 billion, a sharp 39% year-over-year increase.
• GAAP EPS rose 34% to $5.83, while non-GAAP EPS increased 27% to $7.63.

RPO: A Staggering $638 Billion Pipeline

While revenue and profits reflect past performance, Remaining Performance Obligations (RPO) — contracted revenue not yet recognized — paint a picture of future growth. Oracle’s RPO figures have reached an unprecedented level that stuns industry peers.

As of the end of the fourth fiscal quarter, Oracle’s total RPO soared to a staggering $638 billion, skyrocketing 363% year over year. In just the fourth quarter alone, RPO climbed by $85 billion from $553 billion in the prior quarter.

Oracle disclosed that the dramatic surge in RPO in the third and fourth quarters was primarily driven by long-term AI computing capacity agreements with major large language model developers including OpenAI, Meta and xAI.

The company has secured $75 billion in commitments under the Bring Your Own Hardware (BYOH) and prepaid contract framework. Amid a severe global GPU shortage, major clients have adopted the BYOH model: they procure GPUs on their own and deploy the hardware at Oracle’s data centers for managed operation.

Outlook for the Next Quarter: Sustained Robust Growth

Oracle’s management issued highly upbeat and aggressive guidance for the first quarter of fiscal 2027 and the full fiscal year, signaling continued strong momentum for the tech giant.

• Revenue for Q1 fiscal 2027 is projected to rise 27%–29% year over year, with cloud revenue expected to surge 58%–64% year over year.
• Full-year fiscal 2027 total revenue is forecast to grow 34%, and the company reaffirmed its target of pushing annual revenue toward $90 billion.

Unlike many large tech firms that see growth cool amid larger revenue bases, Oracle continues to deliver accelerating expansion.

Core Concern: Soaring Capital Expenditures Draining Free Cash Flow

Despite stellar operational results and upbeat guidance, market investors remain wary — the root cause lies in massive capital expenditures (CapEx) that have severely eroded the company’s free cash flow.

To expand AI data center capacity and procure high-cost GPUs at scale, Oracle has ramped up capital spending aggressively.

The company posted **negative free cash flow of $23.7 billion**, with plans to spend $70 billion on capital expenditures over the next year, driving a sharp rise in debt pressure.

Throughout fiscal 2026, Oracle raised $43 billion via debt financing and $5 billion through equity offerings, for a total of $48 billion in external funding. For fiscal 2027, the company plans to secure approximately $40 billion in combined debt and equity financing, including a previously announced $20 billion at-the-market equity issuance program.

This AI-driven expansion fueled by heavy borrowing and capital raises poses major risks. If AI monetization slows down in the future, hefty depreciation of fixed assets and mounting interest expenses will eat into corporate profits.

During the earnings call, Oracle CEO Larry Ellison remarked: “My job is to find ways to spend money faster.”