Oracle delivered a record-breaking financial report. However, behind the data growth, AI cloud orders are driving up the company's data center spending and capital expenditures, and the full-year free cash flow has been marked as negative.
On June 10th, Oracle released its 2026 fourth quarter (corresponding to February 2025 to May 2026) and full-year financial report as of May 31, 2026.
The report showed that Oracle's fourth-quarter total revenue was $19.2 billion, a 21% year-over-year increase. Excluding the impact of exchange rate fluctuations, the year-over-year growth was 20%, outperforming market expectations. According to data provided by LSEG, analysts had previously expected Oracle's fourth-quarter revenue to be $19.1 billion.
Operating income was $6.1 billion, a 20% increase from the same period last year's $5.1 billion; on a non-GAAP basis, Oracle's fourth-quarter adjusted operating income was $8.6 billion, compared to $7.0 billion in the same period last year.
The operating margin was 32%, down from the previous year's 33%. On a non-GAAP basis, Oracle's fourth-quarter operating margin was 45%, compared to 44% in the same period last year.
Net income was $4.22 billion, a 23% increase from the previous year's $3.43 billion. On a non-GAAP basis, Oracle's fourth-quarter net income was $6.2 billion, a 26% increase from the previous year's $4.9 billion.
Diluted earnings per share were $1.45, a 21% increase from the previous year's $1.19. On a non-GAAP basis, diluted earnings per share were $2.11, a 24% increase from the previous year's $1.70.
Looking at the full year, Oracle's total revenue was $67.4 billion, a 17% year-over-year increase, reaching a historic high. Cloud business revenue for the year was $34 billion, a 39% increase, while software revenue was $24.5 billion, a 1% decline year-over-year.
Net Income of $17 billion, a 36% year-over-year growth. Non-GAAP Net Income of $22.2 billion, a 29% year-over-year growth. Earnings Per Share of $5.83, a 34% year-over-year growth. Non-GAAP Earnings Per Share of $7.63, a 27% year-over-year growth.
Behind the record-breaking revenue, AI is raising Oracle's revenue ceiling and also increasing its capital expenditure pressure.
Oracle's Operating Cash Flow for the full fiscal year 2026 was $32 billion, a 54% year-over-year growth. Free Cash Flow was negative $23.7 billion, with Capital Expenditures of $55.7 billion.
Oracle also announced a quarterly dividend of $0.50 per share, payable on July 24, 2026, to shareholders of record as of the close of business on July 10, 2026.
After the financial report was released, Oracle's stock price dropped by 5% in after-hours trading. Prior to this, Oracle's stock price had risen by 3% year-to-date, underperforming the S&P 500 index, which had risen by 6% during the same period.
Cloud Business Holding Up Half of Oracle's Empire
Oracle's cloud business (IaaS and SaaS) contributed $9.9 billion in revenue in the fourth quarter, a 47% year-over-year growth, effectively holding up half of the company's total revenue.
The real driver of growth was the Cloud Infrastructure business (IaaS), with quarterly revenue of $5.8 billion, a 93% year-over-year growth. This growth rate slightly exceeded the market's expectation of 91% and is considered top-tier within the entire cloud computing industry. The company's annual IaaS revenue reached $18.1 billion, a 77% growth.
In contrast, the Cloud Application business (SaaS) had fourth-quarter revenue of $4.1 billion, a 10% growth rate, which is stable but not impressive.
Meanwhile, the Traditional Software Licensing and Support business continued to decline, with quarterly revenue of $6.8 billion, a 2% year-over-year decrease, indicating that the trend of customer migration to the cloud is ongoing. The Services and Hardware businesses grew by 13% and 9% respectively, but due to their smaller scale, their impact on the company's overall performance is limited.
Both the database and application businesses have benefited from Oracle's early adoption of AI. Oracle's Cloud AI Database revenue grew by 404% in the fourth quarter, with a 325% year-over-year increase in orders, making it the fastest-growing business in the company's history. This growth at the product level confirms that the demand for AI is not only at the infrastructure level but is also penetrating the upstream data management layer.
In its earnings report, Oracle attributed the performance growth to the broad market demand for the company's cloud technology and application suite. Through the shift in revenue structure, Oracle has nearly completed its transition from a database software company to a cloud infrastructure provider, with AI-driven compute demand being the primary driver of this transformation.
The AI Bet Behind the $638 Billion Orders
The most notable figure in the financial report is the remaining performance obligations, which represent the total value of contracts signed but not yet recognized as revenue.
By the end of the fourth quarter, this number reached $638 billion, up from $553 billion one quarter ago, reflecting a net increase of $85 billion in three months, a year-over-year growth rate of 363%. Wall Street analysts had previously estimated this figure to be around $590-600 billion, making the actual data significantly higher than expected.
A key point highlighted by Bank of America analysts in their report was that of the $638 billion, over half is from OpenAI. This means that Oracle's largest customer currently is an AI startup that is itself burning through a significant amount of cash.
Oracle explained the composition of these orders in its statement. Most of the new Remaining Performance Obligation (RPO) comes from large AI contracts, where customers either prepay for GPU purchases or buy GPUs themselves to be deployed by Oracle. The cumulative amount of these contracts, where customers bear the hardware costs, is currently $75 billion. Oracle explained that this arrangement significantly eases the funding pressure on the company to build AI data centers.
This structure reduces some of Oracle's financial risks. However, the challenge lies in the fact that if the largest customer itself faces funding pressures or if there is a fluctuation in AI industry demand, the highly concentrated order structure itself becomes a risk point.
Reuters analysis states that the software industry is facing investor concerns about AI tools potentially replacing traditional software products, which could divert enterprise customers away from the traditional software field, posing an additional challenge for Oracle.
Behind the Massive Orders Are Heavier Capital Expenditures
The massive capital investment supported Oracle's $638 billion order. Oracle's capital expenditure in Q4 was $15.9 billion, totaling $55.7 billion for the year, significantly exceeding Oracle's previous guidance of $50 billion.
This directly led to the deterioration of free cash flow. Despite a record operating cash flow of $32 billion for the year, after deducting capital expenditures, free cash flow turned negative at $23.7 billion.
To fill the funding gap, Oracle raised $43 billion through debt financing and $5 billion through equity financing in the 2026 fiscal year.
The company also announced plans to raise an additional $40 billion in the 2027 fiscal year, including the previously disclosed $20 billion in equity financing. Oracle stated that it would not issue new debt in the second half of 2026, but this news failed to stabilize the market sentiment.
CNBC believes that the previous financing moves had already raised investor concerns as there was uncertainty in the market about whether the demand for AI could absorb such a massive influx of capital. As the company further increased the size of the financing, these concerns were exacerbated.
Reuters further analyzed that Oracle's performance may intensify two concerns for investors: first, the disruption of AI-driven traditional software demand, which could divert enterprise customers from the traditional software sector; second, Oracle's high debt level on the balance sheet itself poses financial risk.
TD Cowen analyst Derrick Wood pointed out that Oracle's stock price had previously risen possibly due to investors having a more optimistic outlook on the computing service provider and Oracle's most important customer, OpenAI.
In other words, the market had already accumulated a certain increase and optimistic expectations before the financial report was released. When the new financing plan and higher-than-expected capital expenditures were made public, some investors may choose to reassess risks or take profits, amplifying the magnitude of the stock price decline.
2027 Fiscal Year Revenue Target $900 Billion
Oracle has provided clear expectations for the next stage of growth.
For the first quarter of the 2027 fiscal year, total revenue growth is expected to be between 27% and 29%, with adjusted earnings per share between $1.72 and $1.76. The midpoints of these two guidance metrics are higher than analysts' expectations. In addition, the cloud business revenue growth guidance is set at 57% to 63%, continuing its strong growth trajectory.
For the entire fiscal year 2027, Oracle reiterated its $900 billion revenue target, while raising its adjusted earnings per share guidance to $8.05.
The company stated in its announcement that this growth rate was calculated excluding one-time items such as the sale of the Ampere chip business and Bloom Energy warrants in fiscal year 2026, resulting in an actual year-over-year growth of approximately 18%. Analysts had previously expected an earnings per share of $8.01 and revenue of $889 billion.
Key Focus on AI in Healthcare
In addition to cloud infrastructure and AI compute orders, Oracle is working on extending its AI capabilities to more specific industry applications, with healthcare being one of its prominently emphasized directions.
The Oracle Health application suite will introduce an AI-based Cerner hospital and clinic patient care management system, with expectations that this product will drive double-digit growth for the health business in fiscal year 2027. Oracle emphasized in its statement that this is just the beginning of the expansion into the healthcare sector.
In a longer-term technological outlook, Oracle believes AI is poised to fundamentally transform healthcare.
The company outlined three specific areas: the Oracle Health AI system will allow doctors to spend less time in front of the computer and more time with patients; AI molecular design models are expected to accelerate the development of life-saving drugs by researchers; and a new AI clinical trials system aims to enable regulatory agencies to swiftly review and approve clinical trial results, allowing patients faster access to new medications.
Oracle does not want to remain just an AI compute provider but also aims to embed AI capabilities into specific processes such as medical software, drug development, and clinical trials. However, compared to cloud infrastructure orders, this segment of the business is still in the early stages, and its ability to translate into scalable revenue will require further validation over time.
Welcome to join the official BlockBeats community:
Telegram Subscription Group: https://t.me/theblockbeats
Telegram Discussion Group: https://t.me/BlockBeats_App
Official Twitter Account: https://twitter.com/BlockBeatsAsia
