| | | Oracle outlines 77% cloud infrastructure growth target for FY26 as AI demand accelerates RPO to $455B
Sep. 09, 2025 8:51 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Oracle Corporation (ORCL) Q1 2026
Management View- Safra Catz, CEO, stated, "Clearly, we had an amazing start to the year because Oracle has become the go-to place for AI workloads. We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD and many others." Catz reported remaining performance obligations (RPO) reached $455 billion, up 359% year-over-year and up $317 billion from Q4, with cloud RPO growing nearly 500%. She announced, "Total cloud revenue, that's both Apps and Infrastructure was up 27% to $7.2 billion. Cloud infrastructure revenue was $3.3 billion, up 54%. OCI consumption revenue was up 57%. Cloud database services, which were up 32%, now have annualized revenues of nearly $2.8 billion." Catz added, "I expect our operating income will grow mid-teens this year and higher still in FY '27."
- Catz also highlighted product expansion, stating, "Multi-cloud database revenue, where OCI regions are embedded in AWS, Azure and GCP grew 1,529% in Q1."
- Catz provided new capital expenditure guidance, "Given our RPO growth, I now expect fiscal year '26 CapEx will be around $35 billion."
- On strategic outlook, Catz announced, "We now expect Oracle Cloud Infrastructure will grow 77% to $18 billion this fiscal year and then increase to $32 billion, $73 billion, $114 billion and $144 billion over the following 4 years."
- Lawrence Ellison, Co-Founder, Chairman & CTO, emphasized, "Several world-class AI companies have chosen Oracle to build large-scale GPU-centric data centers to train their AI models. That's because Oracle builds gigawatt scale data centers that are faster and more cost efficient at training AI models than anyone else in the world."
Outlook- Catz stated, "For fiscal year 2026, we remain confident and committed to full year total revenue growth of 16% in constant currency." She added, "Total revenue are expected to grow from 12% to 14% in constant currency and are expected to grow from 14% to 16% in U.S. dollars at today's exchange rate" in Q2. "Total cloud revenue is expected to grow from 32% to 36% in constant currency and is expected to grow from 33% to 37% in USD. Non-GAAP EPS is expected to grow between 8% to 10% and between -- be between $1.58 and $1.62 in constant currency. Non-GAAP EPS is expected to grow 10% to 12% and be between USD $1.61 and USD 1.65."
- Catz noted, "I expect we will sign additional multibillion-dollar customers and that RPO will likely grow to exceed $0.5 trillion."
Financial Results- Catz stated, "Total revenues for the quarter were $14.9 billion, up 11% from last year and higher than the 8% growth reported in Q1 last year. Operating income grew 7% to $6.2 billion. Non-GAAP EPS was USD 1.47 in U.S. dollars, while GAAP EPS was USD 1.01 in U.S. dollars."
- She reported, "Operating cash flow for Q1 was $8.1 billion, while free cash flow was a negative $362 million with CapEx of $8.5 billion. At quarter end, we had $11 billion in cash and marketable securities and short-term deferred revenue balance was $12 billion, up 5%."
- Catz disclosed, "This quarter, we repurchased 440,000 shares for a total of $95 million. In addition, we paid out dividends of $5 billion over the last 12 months, and the Board of Directors again declared a quarterly dividend of $0.50 per share."
Q&A- John DiFucci, Guggenheim Securities: "Oracle has become the de facto standard for AI training workloads and you make money at it... can you talk about what else... is driving these pretty amazing forecasts?" Lawrence Ellison: "There is a huge amount of demand for inferencing. And if you think about it, in the end, all this money we're spending on training is going to have to be translated into products that are sold, which is all inferencing... we had to change our database, fundamentally change our database so you can vectorize all data..."
- Brad Zelnick, Deutsche Bank: "Where do you see this all going for the industry? Where does the market share go to the companies that don't have the database that don't have the advantages that you have all the way down to the silicon? Is this maybe an extinction event?" Ellison: "We have tremendous advantages in the application space. We have tremendous advantages in the AI inferencing space... We're the only -- is there anyone else doing this? Not that I know of."
- James Wood, TD Cowen: "Could you provide a bit more context on how much CapEx and operational cost structure will be needed to fully service these contracts?... how investors should be thinking about the ROI on the spend?" Catz: "CapEx looks like it's going to be about $35 billion for this fiscal year. But because we're monitoring this, we're literally putting it in right when we take possession and then handing it over to generate revenue right away."
- Mark Moerdler, Bernstein: "Could you please explain to us how Oracle can create enough of a differentiated moat to assure this business does not get commoditized?..." Ellison: "Our networks move data very, very fast. And if we can move data faster than the other people, if we have advantages in our GPU superclusters that are performance advantages, if you're paying by the hour, if we're twice as fast, we're half the cost."
- Aleksandr Zukin, Wolfe Research: "How soon after the introduction of the Oracle AI database, would you expect your enterprise customers... to really be open to interrogating their enterprise data in this fashion?..." Ellison: "I think the demand is going to be insatiable. But we can deliver a lot of databases and a lot of AI across our cloud over the next several years."
Sentiment Analysis- Analysts expressed a highly positive tone, with repeated congratulations and remarks about the "momentous quarter" and the "seismic shift happening in computing," as well as comments describing the results as "amazing."
- Management maintained a confident and assertive tone, emphasizing superior technology, rapid growth, and Oracle's leadership in AI workloads. Catz and Ellison both highlighted the company's advantages and described demand as "insatiable." Ellison reinforced confidence with statements such as, "We think we are in a pretty good position to be a winner in the inferencing market."
- Compared to the previous quarter, both management and analysts have shifted from strong optimism to near euphoria, underscoring the magnitude of Oracle's reported RPO growth and expanded AI partnerships.
Quarter-over-Quarter Comparison- RPO surged from $138 billion in Q4 to $455 billion in Q1, with cloud RPO registering nearly 500% growth, compared to 56% growth previously.
- Cloud infrastructure revenue growth increased to 54% year-over-year in Q1, from 52% in Q4.
- Q1 guidance now includes a projected 77% increase in Oracle Cloud Infrastructure revenue, a notable upward revision from the "over 70%" guidance in Q4.
- CapEx guidance for FY26 was raised to $35 billion versus "over $25 billion" previously.
- Management tone became even more confident, with heightened focus on AI inferencing and vectorized database capabilities, while analysts' sentiment moved from impressed to highly enthusiastic.
- The strategic narrative shifted from general cloud growth to Oracle's unique positioning as the "go-to place for AI workloads" and a custodian of high-value enterprise data, underlining a differentiated moat.
Risks and Concerns- Catz noted, "The non-GAAP tax rate for the quarter was 20.5%, which was higher than the 19% guidance and caused EPS to be $0.03 lower."
- Management cited ongoing supply constraints, with Ellison referencing calls for all available inferencing capacity and "demand continues to dramatically outstrip supply."
- Catz addressed CapEx management, stating that investments are closely aligned with accepted contracts and equipment deployment to mitigate excess spending risks.
- Ellison emphasized that Oracle's ability to provide secure, private AI solutions is critical due to customer data privacy requirements, which could pose adoption risks if not maintained.
Final Takeaway
With record-breaking RPO growth, expanded partnerships across the AI ecosystem, and aggressive guidance for cloud infrastructure and total revenue, Oracle management underscores the company's position as a leader in AI-powered cloud services. The quarter’s results and upwardly revised outlook reflect surging demand for both training and inferencing workloads, significant CapEx commitments, and a broadened moat driven by proprietary database and networking technologies. Management remains confident in Oracle’s ability to accelerate revenue and profit growth, driven by structural advantages and ongoing innovation in AI and cloud infrastructure.
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