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    ORCL
    Earnings call· Aug 2025(Q1 FY26)

    ORACLE CORP ORCL

    Sep 9, 2025 Source

    Executive summary

    Oracle Q1 FY26 — AI Workload Demand Drives Record RPO and Strong Cloud Growth

    Oracle delivered an exceptional Q1 FY26, driven by unprecedented demand for its cloud infrastructure and AI capabilities, leading to record RPO growth. The company is strategically investing heavily in CapEx to meet this demand, particularly for AI workloads, and is expanding its multi-cloud database presence. Management is confident in accelerating top and bottom-line growth, leveraging its unique position in both AI training and inferencing markets.

    Highlights

    5

    • Remaining Performance Obligations (RPO) grew 359% year-over-year to $455 billion, increasing by $317 billion from Q4 FY25.

    • Cloud RPO grew nearly 500% year-over-year, building on 83% growth in the prior year.

    • Total cloud revenue (Apps and Infrastructure) increased 27% to $7.2 billion.

    • Cloud infrastructure revenue grew 54% to $3.3 billion, with OCI consumption revenue up 57%.

    • Multi-cloud database revenue, with OCI regions embedded in AWS, Azure, and GCP, grew 1,529% in Q1.

    Concerns

    3

    • The non-GAAP tax rate of 20.5% was higher than the 19% guidance, causing non-GAAP EPS to be $0.03 lower.

    • Free cash flow was negative $5.9 billion for the last four quarters and negative $362 million for Q1 FY26, driven by significant CapEx investments.

    • OCI demand continues to dramatically outstrip supply, indicating capacity constraints despite aggressive build-out.

    Guidance & targets

    19
    CategoryTargetConfidence
    Operating income growth
    mid-teens
    high materiality
    High
    Operating income growth
    higher still
    high materiality
    High
    RPO
    exceed $0.5 trillion
    high materiality
    High
    Oracle Cloud Infrastructure revenue
    $18 billion
    high materiality
    High
    Oracle Cloud Infrastructure revenue
    $32 billion
    high materiality
    High
    Oracle Cloud Infrastructure revenue
    $73 billion
    high materiality
    High
    Oracle Cloud Infrastructure revenue
    $114 billion
    high materiality
    High
    Oracle Cloud Infrastructure revenue
    $144 billion
    high materiality
    High
    Total revenue growth (constant currency)
    16%
    high materiality
    High
    CapEx
    around $35 billion
    high materiality
    High
    Total revenue growth (constant currency)
    12% to 14%
    high materiality
    High
    Total revenue growth (USD)
    14% to 16%
    high materiality
    High
    Total cloud revenue growth (constant currency)
    32% to 36%
    high materiality
    High
    Total cloud revenue growth (USD)
    33% to 37%
    high materiality
    High
    Non-GAAP EPS growth (constant currency)
    8% to 10%
    high materiality
    High
    Non-GAAP EPS (constant currency)
    $1.58 and $1.62
    high materiality
    High
    Non-GAAP EPS growth (USD)
    10% to 12%
    high materiality
    High
    Non-GAAP EPS (USD)
    USD $1.61 and USD 1.65
    high materiality
    High
    Non-GAAP tax rate
    19%
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Total Cloud Revenue (Apps and Infrastructure)
    Represents combined cloud application and cloud infrastructure revenue.
    		$7.2 billion27%——
    Cloud Infrastructure
    Strong growth driven by OCI consumption and multi-cloud database expansion. Demand continues to outstrip supply.
    OCI consumption revenue: 57% growthCloud database services annualized revenue: nearly $2.8 billionCloud database services: 32% growthAutonomous Database revenue: 43% growthMulti-cloud database revenue: 1,529% growth
    		$3.3 billion54%——
    Cloud Application
    Solid growth in cloud applications, particularly in strategic back-office solutions.
    Strategic back-office application revenue: $2.4 billionStrategic back-office application revenue: 16% growth
    		$3.8 billion10%——
    Total Software Revenue
    Overall software revenue declined slightly.
    		$5.7 billion-2%——

    Operational metrics

    14
    Total revenues
    $14.9 billion11% growth YoY
    Q1 FY26

    Total revenues for the quarter.

    Operating income
    $6.2 billion7% growth YoY
    Q1 FY26

    Operating income for the quarter.

    Non-GAAP EPS
    $1.47
    Q1 FY26

    Non-GAAP diluted earnings per share.

    GAAP EPS
    $1.01
    Q1 FY26

    GAAP diluted earnings per share.

    Non-GAAP tax rate
    20.5%vs 19% guidance
    Q1 FY26

    Higher than expected tax rate impacted EPS.

    CapEx
    $27.4 billion
    LTM

    Capital expenditures for the last twelve months.

    CapEx
    $8.5 billion
    Q1 FY26

    Capital expenditures for the first quarter.

    Cash and marketable securities balance
    $11 billion
    Q1 FY26 end

    Balance of cash and marketable securities at quarter end.

    Short-term deferred revenue balance
    $12 billion5% growth YoY
    Q1 FY26 end

    Balance of short-term deferred revenue at quarter end.

    Shares repurchased
    440,000 shares
    Q1 FY26

    Shares repurchased during the quarter.

    Dividends paid
    $5 billion
    LTM

    Total dividends paid over the last twelve months.

    Quarterly dividend
    $0.50
    Q1 FY26

    Quarterly dividend declared by the Board of Directors.

    Shares outstanding reduction
    1/3
    last 10 years

    Reduction in shares outstanding over the last decade through buybacks.

    Multi-cloud database data centers
    34
    Q1 FY26 end

    Number of multi-cloud database data centers currently live.

    Industry KPIs

    7
    MetricValueDetails
    Capacity CAPEX$8.5 billionUSD
    Revenue growth$14.9 billionUSD
    Arr net new arrnearly $2.8 billionUSD
    Rpo current rpo$455 billionUSD
    Bookings billings$455 billionUSD
    Operating FCF margin rule of 4041.6%%
    Ai product adoption monetization57%%

    Orderbook & backlog

    1
    Remaining Performance Obligations (RPO)$455 billionQ1 FY26 end

    359% growth YoY, $317 billion increase from Q4 FY25

    Includes cloud RPO which grew nearly 500% YoY. Much of this revenue is already booked and expected to convert into accelerating revenue and profit growth as capacity comes online.

    Product announcements

    2
    ProductTypeDetails
    Oracle AI databaselaunch
    AI application generatorsmilestone

    Deals & partnerships

    6
    OpenAICloud services contract for AI workloads

    Signed a significant cloud contract for AI workloads.

    xAICloud services contract for AI workloads

    Signed a significant cloud contract for AI workloads.

    MetaCloud services contract for AI workloads

    Signed a significant cloud contract for AI workloads.

    NVIDIACloud services contract for AI workloads

    Signed a significant cloud contract for AI workloads.

    AMDCloud services contract for AI workloads

    Signed a significant cloud contract for AI workloads.

    GoogleIntegration of Gemini LLM into Oracle Cloud

    Deal to make Gemini available from the Oracle Cloud, alongside other LLMs like ChatGPT, Grok, and Llama.

    Risks & headwinds

    3
    OCI demand outstripping supplyCurrent

    Demand continues to dramatically outstrip supply.

    Mitigation: Aggressive CapEx investments (FY26 CapEx around $35 billion) to bring more capacity online and convert RPO backlog into revenue.

    Higher non-GAAP tax rateQ1 FY26

    20.5% in Q1 FY26, higher than 19% guidance, causing $0.03 lower EPS.

    Mitigation: Management noted that one-time tax events could cause actual tax rates to vary, implying it may not be a recurring issue.

    Negative free cash flow due to CapExCurrent

    Negative $5.9 billion (LTM) and negative $362 million (Q1 FY26) with CapEx of $27.4 billion (LTM) and $8.5 billion (Q1 FY26).

    Mitigation: CapEx investments are primarily for revenue-generating equipment going into data centers, expected to convert the large RPO backlog into accelerating revenue and profit growth.

    What to watch in Q2 FY26

    5

    Operating income growth

    FY26
    Current7% (Q1 FY26)
    Targetmid-teens (FY26)

    Why it matters

    Indicates the company's ability to translate revenue growth into profitability amidst heavy investment.

    I expect our operating income will grow mid-teens this year and higher still in FY '27.

    Q&A highlights

    5

    What other factors, beyond AI training, are driving Oracle's impressive forecasts and future growth?

    Larry Ellison highlighted the massive AI inferencing market, which he believes is much larger than training, as a key driver. He explained Oracle's unique ability to combine private enterprise data with public LLMs securely using its new AI database. Safra Catz added that Oracle has become the de facto cloud for many customers due to its comprehensive offerings, including dedicated regions, Cloud@Customer, and a full technology stack from infrastructure to applications.

    “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.”

    asked by John DiFucci · answered by Lawrence Ellison

    2 min read5 chapters

    Detailed Narrative

    01

    AI Workload Dominance and Strategic Cloud Expansion

    Oracle has solidified its position as a premier provider for AI workloads, securing substantial cloud contracts with industry leaders such as OpenAI, xAI, Meta, NVIDIA, and AMD. This demand has driven unprecedented🌐 RPO growth, with the company's cloud RPO increasing by nearly 500% year-over-year. Oracle is aggressively expanding its cloud infrastructure, including gigawatt-scale data centers optimized for AI, and plans to increase its multi-cloud database presence to 71 data centers embedded across AWS, Azure, and GCP, up from 34 currently live.

    02

    Capitalizing on the AI Inferencing Market

    Larry Ellison emphasized the AI inferencing market as a significantly larger opportunity than AI training, with potential applications across robotic factories, drug design, and automated processes. Oracle aims to be a key player by leveraging its new AI database, which vectorizes private enterprise data and integrates with leading LLMs like ChatGPT, Gemini, Grok, and Llama. This unique offering allows customers to securely query their proprietary data with advanced AI models, addressing a critical need for secure and private AI inferencing.

    03

    Internal AI Adoption and Application Generation

    Oracle is not only providing AI infrastructure but also adopting AI internally to enhance operational efficiency, projecting mid-teens operating income growth for FY26. The company is utilizing AI application generators to build its next generation of applications, which are inherently AI-driven and designed to be more efficient and comprehensive than hand-built alternatives. This dual approach of building AI infrastructure and leveraging AI for internal development provides a significant competitive advantage.

    04

    Cost-Effective Cloud@Customer and Dedicated Regions

    Oracle offers highly cost-effective private cloud solutions, including Cloud@Customer and dedicated regions, at a fraction of the cost of competitors. These solutions provide full Oracle Cloud features, security, and consumption-based pricing, allowing large enterprises to maintain data sovereignty and avoid co-tenancy. This flexibility and cost advantage are driving adoption among customers who require dedicated infrastructure for their critical workloads.

    05

    Financial Performance and Capital Allocation

    Oracle reported total cloud revenue of $7.2 billion, up 27%, and total revenues of $14.9 billion, up 11%. Operating income grew 7% to $6.2 billion. The company is making substantial CapEx investments, with FY26 CapEx projected around $35 billion, primarily for revenue-generating equipment in data centers. Oracle continues its capital return program, repurchasing 440,000 shares for $95 million in Q1 and declaring a quarterly dividend of $0.50 per share.

    AI-generated summary of the company’s earnings call. Not investment advice.