Oracle called the third quarter of fiscal 2026 its best in 15 years with revenue up 22% to $17.2 billion and cloud infrastructure up 84% to $4.9 billion. The market rejoiced, sending the stock up nearly 10% in after-hours trading on Tuesday.
Despite the market’s ebullience, the enterprise software giant is blowing through cash at a steadily rising pace. Just three quarters ago, Oracle’s free cash flow was essentially zero, and this quarter it clocked in at negative $24.7 billion over the trailing 12 months as its capital expenditures rocketed from $21.2 billion in fiscal 2025 to a guided $50 billion this fiscal year as the company forges ahead in its AI data center buildout.
Chief financial officer Doug Kehring said after the market closed that Oracle would offer up more information about its capital expenditures for fiscal 2027 next quarter.
“I think we’ll get back to everyone at the end of the fiscal year and talk about next year’s capex at that point,” said Kehring in response to a question. However, he flagged that Oracle is working on financing structures where future spending doesn’t come out of Oracle’s pocket but instead can be paid for by customers paying for capacity and services. “The most interesting thing that you can start thinking about is the uncoupling of CapEx with capital requirements from Oracle,” Kehring said.
Oracle, whose market cap is more than $400 billion, has been shadowed by questions about its aggressive capital spending and mounting debt load. The company guided capex of $50 billion for the current fiscal year, a figure that has helped push its total debt position to more than $100 billion. Last month, Oracle raised $30 billion through a one-two punch of bonds and preferred stock, and said its order book was substantially oversubscribed by investors.
For now at least, the company is delivering strong results as the bet plays out.
At the topline, Oracle on Tuesday reported fiscal third quarter earnings per share up 21% at $1.79, planting it several notches above Wall Street’s expectations of about $1.71 in adjusted earnings per share. The results sent the company’s stock price on an immediate tear in after-hours trading, an ‘Uno reverse’ on the stock’s roughly 20% tumble so far in 2026.
Oracle executives, including Executive Chairman and co-founder Larry Ellison repeatedly stressed that the company’s enterprise software was not at risk of being displaced by business customers using AI tools to build their own versions of the product. Ellison said Oracle is using AI coding tools to build ecosystem automation platforms for hospitals, financial services firms, and retail operations.
“That’s what we’re doing at Oracle,” said Ellison. “That’s why we think we’re a disruptor. That’s why we think the ‘Saaspocalpyse’ applies to others, but not to us.”
A half-trillion dollar backlog
Cloud infrastructure revenue, Oracle’s fastest growing business unit and a key driver behind its AI ambitions, clocked in at $4.9 billion, with 84% growth year-over-year. The figure was in line with consensus estimates and continues along with Ellison’s vision of competing with Amazon and Microsoft in the cloud market.
Total cloud revenue was $8.9 billion and up 44% year-over-year. Its multi-cloud database revenue slice—the amount Oracle earns from running its database software inside competitors’ clouds—was up 531%. That piece is part of Ellison’s strategic plan of threading Oracle into the ecosystems of Amazon’s AWS, Google Cloud, and Microsoft Azure, rather than prodding customers to move their data into Oracle’s infrastructure.
The company didn’t give specific numbers for multi-cloud revenue, but noted that its remaining performance obligations (RPO), which refers to its backlog of contracted future work—was $553 billion. That figure is evidence of demand outpacing supply, said Magouyrk. He added that Oracle signed more than $29 billion in new contracts since last quarter, in a model in which customers fund the capacity buildout themselves.
“A combination of bring-your-own hardware and upfront customer payments enables us to continue expanding without any negative cash flow,” said co-CEO Clay Magouyrk. He noted that Oracle delivered more than 400 megawatts of capacity to customers in the third quarter, with 90% of it on or ahead of schedule.
“It’s unprecedented to be scaling capital into a business so quickly while also increasing profitability,” said Magouyrk during the conference call. “As our business is going through this hyper-growth phase, that’s the only drag on profitability.”
Melissa Otto, head of research at S&P Global Visible Alpha, said Oracle’s debt-to-equity ratio stands between 3x and 4x depending on how it’s defined, which is “pretty significant leverage.”
“The investment community will want to hear what they’re going to do to ensure that the company remains on the right trajectory given that level of leverage,” said Otto in an interview before the earnings results.
Next quarter, Oracle’s C-suite said it expects revenue to grow 19% to 21% and revenue for the full year is expected to be $67 billion. Fiscal 2027 guidance was raised to $90 billion.
“High-growth companies are willing to take a hit in the near term” in pursuit of an outsized gain over the long-term, said Otto, but investors are looking for evidence along the way that capex is translating into return on invested capital, margin expansion, and revenue growth, she said.
“When I look at balance sheets and cash positions of the hyperscalers in the space, they’re very good with the exception of Oracle,” she said.
In its third quarter for fiscal 2026, Oracle reported remarkable financial performance, marking its best results in 15 years. The company announced a 22% increase in revenue, reaching $17.2 billion, alongside an impressive 84% growth in cloud infrastructure revenue, totaling $4.9 billion. This prompted a surge in stock price, nearly 10% higher in after-hours trading.
However, despite this promising performance, Oracle is experiencing significant cash flow challenges. The company’s free cash flow was reported at negative $24.7 billion over the past 12 months, a stark contrast to just three quarters earlier when it was nearly zero. This financial strain stems from escalating capital expenditures, projected to reach $50 billion in fiscal 2026, up from $21.2 billion in the previous year. This massive investment is largely directed toward building AI-driven data center capabilities.
Chief Financial Officer Doug Kehring indicated that further details on capital expenditures for fiscal 2027 would be unveiled next quarter. He noted efforts to structure financing so that future spending could come from customers rather than directly from Oracle’s finances. He emphasized potential strategies to decouple capital expenditures from direct cash outflows, allowing Oracle to expand its infrastructure without imposing immediate costs on the company.
Oracle’s market capitalization exceeds $400 billion, but the company faces scrutiny due to its aggressive capital spending and increasing debt, which has surpassed $100 billion. Recently, Oracle raised $30 billion through a combination of bonds and preferred stock, indicating strong investor interest as the order book was oversubscribed.
On the earnings front, Oracle reported earnings per share (EPS) of $1.79, reflecting a 21% year-over-year increase, and surpassing analysts’ expectations of $1.71. Following the results, the company’s stock rebounded sharply, reversing a decline of approximately 20% earlier in 2026.
Larry Ellison, Oracle’s Executive Chairman, reassured stakeholders that the company’s enterprise software would not be adversely affected by business customers leveraging AI tools to create bespoke products. He highlighted how Oracle is using AI coding tools to build automation platforms across various sectors including healthcare, finance, and retail, claiming Oracle’s identity as a disruptor and distinguishing its position from competitors.
Cloud infrastructure remains a key area of growth, with the latest figures confirming Oracle’s strong performance in this sector. The company’s total cloud revenue reached $8.9 billion, a 44% increase, with multi-cloud database revenue soaring by 531%. This strategy aligns with Ellison’s vision of integrating Oracle’s services with established clouds like AWS, Google Cloud, and Microsoft Azure, rather than insisting on migration to Oracle’s infrastructure.
Although specific figures for multi-cloud revenue weren’t disclosed, Oracle’s remaining performance obligations (RPO)—a backlog of contracted work—amounted to an impressive $553 billion, indicating robust demand. Co-CEO Clay Magouyrk mentioned that in the past quarter, Oracle secured over $29 billion in new contracts, using a model that allows customer-funded capacity growth.
Magouyrk explained that leveraging customer hardware and upfront payments supports the company’s swift expansion while maintaining profitability. He emphasized the unique challenge of scaling capital rapidly amidst the company’s high-growth phase, which currently poses a risk to near-term profitability.
Meanwhile, financial analysts are paying close attention to Oracle’s substantial leverage, currently presenting a debt-to-equity ratio between 3x and 4x, raising concerns about overall sustainability. Melissa Otto of S&P Global Visible Alpha noted that investors will be looking for assurances of Oracle’s strategic direction to manage this leverage effectively.
Looking ahead, Oracle management guided for a 19% to 21% revenue growth in the next quarter, with full-year guidance now projected at $67 billion, and fiscal 2027 expectations rising to $90 billion. This long-term growth strategy involves accepting short-term financial impacts to achieve potentially larger gains.
However, stakeholders are keen to see tangible results from Oracle’s capital investments, particularly in terms of returns on invested capital and margin expansion, especially as compared to competitors in the space who generally maintain healthier balance sheets.
