Oracle posted strong first-quarter results on Thursday afternoon. After a drop in the previous regular session, the stock jumped in premarket trading on Friday.
Adjusted earnings were $1.92 per share, up from $1.47 a year ago and above Wall Street’s estimate of $1.74. Revenue was $19.3 billion, beating expectations and rising 30% from last year.
Investors focused most on revenue from Oracle’s cloud infrastructure segment, which rents out AI computing power online. This business makes up most of the company’s large order backlog, now at $664 billion, and shapes both positive and negative views on the stock.
Cloud infrastructure sales jumped 121% from last year to $7.4 billion, beating expectations. The rest of Oracle’s business saw only modest growth. Second-quarter guidance matched expectations, and the company slightly raised its full-year outlook for adjusted earnings and revenue.
Before the recent surge in AI investment, Oracle was a mature software company with slower growth. It generated strong free cash flow, much of which went back to shareholders through dividends and buybacks, reducing the share count over time.
Today, Oracle’s growth depends more on its growing backlog and cloud infrastructure. This segment was a small part of sales in fiscal 2025 but is expected to make up most of next year’s revenue and keep growing. Although cloud infrastructure has lower gross margins than traditional software, Oracle has mostly balanced this with efficient spending, and its adjusted operating margin has improved from last year.
The move to cloud has changed Oracle’s balance sheet and cash flow. Capital spending is rising quickly, and the company expects a big increase this year. Even that forecast might be low, given how much was spent in the first quarter. Because of this, free cash flow is now negative and share buybacks have stopped, so the share count is going up. Analysts think free cash flow won’t turn positive again until about 2030. To pay for this growth, Oracle has taken on more long-term debt and raised a lot of capital by issuing new shares over the past year.
About half of Oracle’s backlog comes from a major cloud infrastructure contract with OpenAI. As a result, Oracle’s stock has become a stand-in for investor sentiment about the fast-growing AI company, which might go public in the future. This connection hurt Oracle shares over the summer when excitement about OpenAI faded, especially as rival Anthropic grew faster and OpenAI cut prices on some AI models. However, sentiment improved in September, and Oracle shares have risen sharply ahead of Thursday’s report.
OpenAI is still Oracle’s most important contract, but the company’s backlog outside of OpenAI has more than doubled in the past year. This has made Oracle less dependent on that single agreement.
