Oracle tops estimates as AI demand tempers cash-burn fears

Oracle exceeded Wall Street's predictions for quarterly earnings on September 10, with a smaller cash burn than anticipated. This positive news came as the company's AI investments showed promising returns without straining its financials. Shares rose 4% in extended trading following the report, which included a significant increase in revenue backlog.

Oracle's strong performance is driven by robust demand for its cloud computing services, fueled by increasing enterprise spending on AI. The company booked over $30 billion in new AI cloud contracts, raising its revenue backlog to $664 billion, surpassing analysts' estimate of $639.89 billion. Oracle's finance chief, Hilary Maxson, highlighted that most of the new revenue will not require substantial cash outlay for chips, thanks to prepaid contracts and bring-your-own-hardware options.

The majority of these deals do not necessitate additional capital from Oracle. The company anticipates that half of its current backlog will convert into sales within the next 36 months. Oracle's improved balance sheet has alleviated concerns about its capital spending, which had previously raised fears about its free cash flow.

The company's first-quarter revenue increased by 30% to $19.3 billion, outpacing analysts' expectations of $19.14 billion, and adjusted earnings per share reached $1.92, beating the estimated $1.74. Oracle's fiscal 2027 earnings forecast was raised to $8.10 per share from $8.05, with annual profit expected to reach $8.07 per share.