Oracle Q1 Earnings Call Highlights

Key Points

• Record growth accelerated: Oracle’s fiscal Q1 revenue rose 30% to $19.3 billion, driven by a 121% surge in cloud infrastructure revenue to $7.4 billion. Non-GAAP EPS increased 30% to $1.92.
• AI expansion requires heavy investment: Oracle delivered 850 megawatts of AI capacity and more than 300,000 GPUs, while quarterly capital expenditures reached $28 billion. The company expects full-year capital spending of $90 billion to $95 billion and has not set a timetable for returning to positive free cash flow.
• Outlook raised: Oracle now expects at least $90 billion in fiscal-year revenue and non-GAAP EPS of $8.10, supported by growing AI contracts, rising cloud infrastructure demand and stronger conversion of its remaining performance obligations.

Oracle NYSE: ORCL reported record first-quarter fiscal 2027 revenue as cloud infrastructure growth accelerated and the company brought substantial new AI computing capacity online. The company also raised its full-year revenue and non-GAAP earnings outlook, while maintaining plans for heavy capital spending to support demand.

Total first-quarter revenue reached $19.3 billion, up 30% from a year earlier in U.S. dollars, according to Chief Financial Officer Hilary Maxson. Oracle’s cloud infrastructure revenue rose 121% to $7.4 billion, while cloud applications revenue increased 10%.

“If I had to describe this quarter in one word, I think it would be acceleration,” Maxson said, citing progress across cloud infrastructure, database services and applications. Oracle said first-quarter revenue grew sequentially for the first time, contrasting with its historical pattern in which a record fourth quarter was typically followed by a lighter first quarter.

Profit growth and capital spending

Oracle’s non-GAAP operating income increased 31% to $8.2 billion, and non-GAAP earnings per share rose 30% to $1.92. Non-GAAP operating margin remained about flat year over year at 42%.

Maxson said gross margin declined as expected because Oracle is ramping data centers and infrastructure revenue is becoming a larger portion of the business. Lower operating costs and operating leverage tied to simplification and efficiency actions offset the gross-margin impact during the quarter.

Cash flow from operations reached a record $23 billion in the quarter, aided by customer prepayments. Capital expenditures totaled $28 billion, resulting in negative free cash flow of $5 billion. Net cash capital expenditures, after customer prepayments, were $18 billion.

Oracle continues to expect full-year capital expenditures of $90 billion to $95 billion, with net cash capital expenditures not exceeding $70 billion. The company also completed its previously disclosed $20 billion at-the-market equity issuance during the first quarter.

During the question-and-answer session, Maxson said Oracle had not provided a specific timetable for returning to positive free cash flow. However, she said projects become strong free-cash-flow generators shortly after ramping, with potential free-cash-flow conversion of about 100% of post-tax EBITDA.

RPO conversion and infrastructure capacity

Remaining performance obligations, or RPO, increased by $26 billion from the fourth quarter. Maxson said most new contracts used customer prepayments, bring-your-own-hardware arrangements or similar structures that will not require incremental capital from Oracle. The new RPO is not expected to affect Oracle’s capital expenditures or revenue until fiscal 2028 or later.

Oracle now expects roughly half of its RPO to convert to sales over the next 36 months. The company said it has begun to see stronger conversion of contracted backlog into cloud infrastructure revenue and operating profit.

Co-Chief Executive Officer Clay Magouyrk said Oracle delivered 850 megawatts of AI capacity, including more than 300,000 graphics processing units, to customers during the quarter. That delivery level was nearly three times the amount delivered during the preceding fourth quarter and represented 73% of the capacity delivered during the prior fiscal year, according to Magouyrk.

Oracle closed more than $30 billion in additional AI contracts during the quarter without requiring additional cash from the company, Magouyrk said. GPU utilization was 97.9%, and capacity that came up for renewal in the quarter was renewed or resold at prices 20% above prior contracts. He said most of those GPUs were four years old or older.

At Oracle’s Abilene site, the company delivered 131,000 GPUs during the first quarter. Six of eight campus buildings, representing 618 megawatts and 75% of the site’s total capacity, have been delivered to the customer. Magouyrk said Oracle expects to deliver its first NVIDIA Vera Rubin systems to customers in the second quarter.

Addressing questions about development sites in New Mexico and Wisconsin, Magouyrk said neither location would affect Oracle’s fiscal 2027 revenue or earnings guidance. He said data center construction in New Mexico is on track while the company works through an air-permit process, and Wisconsin construction is also on track as Oracle works with energy partners on power delivery.

Applications and AI products

Oracle’s SaaS business grew 10%, with Fusion revenue increasing 14%. Oracle Health continued to accelerate, while industry applications grew by more than 20%, according to Co-Chief Executive Officer Mike Sicilia.

Sicilia said customers used Oracle’s embedded AI capabilities more than 150 million times during the quarter, up 42% sequentially. AI agents executed more than 3.5 million times in production, nearly doubling from the prior quarter, while the number of customers’ AI agents in production rose 90% to more than 2,300.

Oracle plans to unveil an agentic AI accelerator at its AI World event in October. Sicilia said the product is intended to automate and orchestrate application implementations, potentially compressing deployments from years to months and from months to weeks.

• Oracle announced general availability of NetSuite Next, an AI-powered agentic experience for NetSuite users.
• The NetSuite AI Connector Service, which connects NetSuite data with AI assistants including ChatGPT and Claude, has been adopted by more than 10,000 customers.
• Oracle said it will introduce an agentic care-management system at its Oracle Health and Life Sciences customer event.

On the database side, Magouyrk said multicloud database revenue increased 353% year over year and multicloud customers grew 180%. Oracle completed its planned Azure and AWS footprint expansion, reaching 70 multicloud database regions and 119 availability zones. The company also made Oracle Interconnect for AWS generally available.

Outlook raised

For the fiscal second quarter, Oracle expects total revenue growth of 30% to 34% in U.S. dollars and cloud revenue growth of 65% to 71%. It forecast non-GAAP earnings per share of $1.85 to $1.93, representing growth of 21% to 25%, excluding gains related to Ampere recorded in the prior-year quarter.

For the full fiscal year, Oracle raised its outlook to at least $90 billion in revenue, which would represent 34% year-over-year growth, and non-GAAP earnings per share of $8.10.

About Oracle (NYSE:ORCL)

Oracle Corporation is a global enterprise technology company that develops and provides database software, cloud infrastructure, business applications and related technology services. Its offerings help organizations manage data, run applications, support business operations and build technology environments across on-premises, hybrid and cloud-based settings.

The company's products include Oracle Database, MySQL, Java, Oracle Cloud Infrastructure and a broad portfolio of cloud applications for enterprise resource planning, financial management, human resources, supply chain management, customer experience and industry-specific operations.

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