Oracle Record AI Cloud Earnings; Stock Drops on $55B Capex Splurge
Oracle posted record FY2026 AI cloud results but shares fell 7% on massive capital expenditure plans.
"Oracle's backlog just hit $638 billion. The stock dropped anyway. That's what betting $55 billion on the future looks like."
Oracle reported record Q4 and full-year FY2026 results on June 10, 2026, with total Q4 revenues reaching $19.2 billion, up 21% year over year. Cloud revenues surged 47% to $9.9 billion, led by 93% growth in Cloud Infrastructure (IaaS). Non-GAAP EPS rose 24% to $2.11. The headline number that stunned analysts: remaining performance obligations (RPO) exploded 363% year over year to $638 billion, with Bank of America noting OpenAI accounts for over 50% of that backlog. Four individual customers each signed contracts exceeding $8 billion during the quarter alone.
Despite the blowout results, Oracle shares dropped more than 7% in after-hours trading, closing at $191.49. The market's concern centers on Oracle's capital expenditure bill — $55.7 billion in FY2026, up 162% — and plans to raise an additional $40 billion through debt and equity. Free cash flow turned deeply negative at $23.7 billion. GPU utilization hit 97.5% globally, with over 1.2 gigawatts delivered to customers in FY2026.
Oracle and OpenAI simultaneously announced a deepened commercial partnership, allowing Oracle enterprise customers to apply Universal Credits toward OpenAI models and Codex via OCI. This positions Oracle as a critical AI infrastructure layer between hyperscalers and the world's most prominent AI lab, with Q1 FY2027 delivery capacity expected to approach 1 gigawatt.
Oracle's $638 billion RPO signals enterprise AI infrastructure spending is accelerating far faster than most forecasts anticipated. Businesses evaluating cloud AI vendors should note Oracle OCI's direct OpenAI integration as a competitive differentiator against AWS and Azure. The negative free cash flow and massive capex warn that AI infrastructure costs are scaling aggressively — expect pricing pressure and contract complexity to follow.
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