Oracle beats Q1 estimates, raises full-year guidance as AI cloud revenue surges 121%

Oracle Corp. (NYSE: ORCL) posted first-quarter earnings that topped analyst estimates and lifted its full-year guidance on Thursday, as the company’s cloud infrastructure business more than doubled and its backlog of contracted work swelled to a record level.

The enterprise software provider reported non-GAAP earnings per share of $1.92 for the quarter ended August 31, beating the consensus estimate of $1.74 by $0.18. Revenue rose 29.6% year over year to $19.34 billion, ahead of the $19.13 billion analysts had forecast. On a reported basis, first-quarter revenue reached $19.3 billion, up 30% in U.S. dollars.

“If I had to describe this quarter in one word, I think it would be acceleration,” Chief Financial Officer Hilary Maxson said on the earnings call, citing progress across cloud infrastructure, database services and applications.

Oracle said first-quarter revenue grew sequentially for the first time, a departure from its historical pattern of a lighter period following a record fourth quarter.

**Cloud infrastructure fuels growth**

Cloud infrastructure revenue surged 121% to approximately $7.4 billion, reinforcing the view that Oracle is benefiting from rising demand for AI computing capacity. Co-Chief Executive Officer Clay Magouyrk said the company 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 in the preceding fourth quarter and represented 73% of the capacity delivered during the prior fiscal year.

GPU utilization reached 97.9%, and capacity that came up for renewal was renewed or resold at prices 20% above prior contract levels. Oracle closed more than $30 billion in additional AI contracts during the quarter without requiring incremental cash from the company, according to Magouyrk.

The company’s remaining performance obligations (RPO) increased by $26 billion from the fourth quarter, and Oracle now expects roughly half of its RPO to convert to sales over the next 36 months. Most new contracts used customer prepayments or similar structures that will not require additional capital outlay from Oracle, the company said.

**Guidance raised, spending plans unchanged**

Oracle raised its full-year fiscal 2027 revenue and non-GAAP earnings outlook. The company forecast adjusted EPS of $8.10 for the full year, above the approximately $7.75 consensus estimate. For the second quarter, Oracle guided EPS in a range of $1.85 to $1.93, compared with expectations near $1.82.

Management maintained its fiscal 2027 capital-expenditure outlook of $90 billion to $95 billion, signaling confidence that heavy investment in data centers will continue to support cloud growth. Net cash capital expenditures, after customer prepayments, are expected not to exceed $70 billion.

Maxson said 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. She said Oracle had not provided a specific timetable for returning to positive free cash flow but noted that projects become strong free-cash-flow generators shortly after ramping.

**Analyst ratings remain broadly bullish**

Following the results, several analysts updated their views on Oracle. Cantor Fitzgerald reaffirmed an “overweight” rating and set a $284 price target. Wolfe Research reiterated an “outperform” rating with a $225 target. Stifel Nicolaus initiated coverage with a $200 price target. Oppenheimer reiterated an “outperform” rating, and UBS Group reissued a “buy” rating.

BMO Capital Markets lowered its price target to $195 from $220 but retained an “outperform” rating, reflecting upside potential alongside valuation and execution concerns.

According to MarketBeat, Oracle carries an average rating of “Moderate Buy” and a consensus price target of $255.92.

**Dividend declared, insider sells shares**

Oracle announced a quarterly dividend of $0.50 per share, payable October 23 to shareholders of record October 9. The ex-dividend date is October 9. The dividend represents an annualized payout of $2.00 per share, yielding 1.3%, and a dividend payout ratio of 34.31%.

In a separate filing, Vice Chairman Jeffrey Henley sold 400,000 shares at an average price of $159.16, a transaction valued at $63.7 million. The sale, executed under a prearranged Rule 10b5-1 trading plan, reduced Henley’s ownership by 50%. Insiders collectively own 40.9% of the company’s stock.

**Risks remain on execution, backlog conversion**

While demand signals are strong, Oracle faces ongoing execution risks. Heavy AI capital spending continues to pressure free cash flow. The company’s New Mexico data-center construction was delayed by a gas-pipeline issue, though management said both the New Mexico and Wisconsin sites are on track and will not affect fiscal 2027 revenue or earnings guidance.

Analysts also note that a significant portion of the $664 billion in RPO may take years to convert into revenue. Maxson said the new contracts added during the quarter are not expected to affect capital expenditures or revenue until fiscal 2028 or later.

Trading volume in Oracle shares was elevated on Friday, with approximately 22.5 million shares changing hands, a 22% decline from the prior session’s volume of 28.8 million shares. The stock last traded at $156.16, up from the previous close of $152.94.