Oracle expects cloud infrastructure revenue to increase by over 70% in the new fiscal year, rising by as much as 8% in after-hours trading | Earnings Report Insights

Oracle announced its earnings report after the market closed on Wednesday, showing that the company's fourth-quarter performance exceeded expectations. Although cloud infrastructure slightly fell short of expectations, management anticipates that revenue from cloud infrastructure will grow by more than 70% in fiscal year 2026. Meanwhile, after a threefold increase in capital expenditure last year, it is expected to continue rising to $25 billion in the new fiscal year. Oracle's stock price initially fell about 3% after hours but later turned to rise by 8%.

Here are the key points from Oracle's fourth-quarter earnings report:

Key Financial Data:

Fourth Quarter Revenue: Oracle's fourth-quarter revenue was $15.9 billion, a year-on-year increase of 11%, compared to analysts' expectations of $15.59 billion.

Fourth Quarter Operating Profit: Oracle's fourth-quarter operating profit was $7.04 billion, exceeding analysts' expectations of $6.85 billion.

Fourth Quarter Operating Margin: Oracle's fourth-quarter operating margin was 44%, in line with analysts' expectations.

Adjusted EPS: Oracle's adjusted EPS for the fourth quarter was $1.70, compared to analysts' expectations of $1.64.

Cloud Business Data:

Fourth Quarter Cloud Infrastructure Revenue: Oracle's fourth-quarter cloud infrastructure revenue (IaaS) was $3 billion, soaring 52% year-on-year, while analysts expected $3.07 billion.

Fourth Quarter Total Cloud Revenue: Oracle's total cloud revenue (IaaS plus SaaS) for the fourth quarter grew by 27% year-on-year, reaching $6.7 billion, accounting for 42% of total revenue.

CEO Safra Catz stated during the analyst conference call that revenue from cloud infrastructure is expected to grow by more than 70% in fiscal year 2026, compared to a growth rate of 52% this quarter. She also predicted that the company's revenue for fiscal year 2026 will exceed $67 billion, while analysts expect $65.18 billion.

For the first quarter of fiscal year 2026, the company expects adjusted EPS to be between $1.46 and $1.50, with revenue growth between 12% and 14%, while analysts expect $1.48 per share. Revenue is projected to be $14.96 billion, corresponding to a growth of 12.4%.

Boosted by strong data and performance guidance, Oracle's stock surged by as much as 8% after hours. Over the past month, the company's stock price has risen by 17%.

Performance Not Yet Achieved Year-on-Year Growth of 41%

Oracle, long known for its database software, has been making continuous efforts in the cloud computing field in recent years, aiming to become a leading provider of computing and storage leasing services globally, particularly targeting clients focused on artificial intelligence work. Earlier this year, Oracle announced a joint venture with OpenAI named "Stargate" to provide large-scale computing capabilities. At the same time, Oracle has signed contracts with several cloud computing clients, including Elon Musk's xAI and Meta Platforms Inc In the financial report, it is particularly noteworthy that the "Remaining Performance Obligations" (RPO) data has increased significantly by 41% year-on-year, reaching $138 billion. RPO represents contracted revenue that has been signed but not yet recognized, indicating strong visibility for future revenue. The substantial growth in RPO suggests that Oracle has successfully secured a large number of long-term customer commitments in the cloud services sector.

Management is Extremely Optimistic

The management's outlook for the future is extremely optimistic. CEO Safra Catz stated that total cloud revenue growth is expected to accelerate from 24% in fiscal year 2025 to over 40% in fiscal year 2026, while cloud infrastructure growth is projected to jump from 50% to over 70%. Most notably, RPO for FY26 is expected to grow by over 100%, indicating a significant surge in future contract order reserves.

Oracle CEO Safra Catz stated:

“Fiscal year 2025 has performed exceptionally well—but we believe fiscal year 2026 will be even better, and our revenue growth rate will increase significantly. Oracle is on track to not only become the largest cloud applications company in the world but also one of the largest cloud infrastructure companies globally.”

Oracle Chairman and CTO Larry Ellison noted that the strategic significance of Oracle's "MultiCloud Database" solutions, which compete with Amazon, Google, and Azure, is becoming increasingly prominent, with quarterly revenue growth reaching as high as 115%:

“We currently have 23 multi-cloud data centers online, and we will build 47 more in the next 12 months. We expect triple-digit growth in multi-cloud revenue to continue in FY26. Revenue from Oracle Cloud@Customer dedicated data centers grew by 104% year-on-year, with 29 centers currently online and 30 more to be built in FY26. Overall Oracle Cloud Infrastructure (OCI) consumption revenue grew by 62% year-on-year in the fourth quarter, and we expect OCI revenue growth to accelerate in FY26. The growth rate of OCI is accelerating, and demand is equally strong.”

Analysts believe that the performance of these high-growth businesses highlights Oracle's successful transformation into a modern cloud architecture provider while continuing to leverage its traditional strengths in the database field. Jefferies analyst Brent Thill told the media that the most "stunning" part of the report is Catz's long-term outlook for the company, indicating that future revenue will accelerate. He pointed out that the growth in new orders may come from collaborations related to OpenAI and Stargate.

Capital Expenditure is Three Times That of the Previous Year, Expected to Exceed $25 Billion in the New Fiscal Year

In fiscal year 2025, Oracle's capital expenditure exceeded $21 billion, while in fiscal year 2024 it was less than $7 billion. Catz stated that capital expenditure in the new fiscal year will exceed $25 billion. Analysts noted that building the first large data center for Stargate in Abilene, Texas, requires a significant cash investment In this quarter, Oracle announced a partnership with Cleveland Clinic and UAE-based artificial intelligence holding company G42 to launch an AI platform focused on healthcare. Additionally, Oracle also announced a commitment to collaborate with IBM in cloud computing and consulting services. SoftBank also announced this quarter that it will acquire Ampere, a chip design startup supported by Oracle, for $6.5 billion