Analysts Raise Oracle Outlook After Strong AI Cloud Quarter

Oracle reported fiscal first-quarter revenue of $19.35 billion, beating the $19.14 billion consensus, and net income of $4.7 billion, up 60% from a year earlier. The stock rose about 6% in premarket trading following the release.

Cloud revenue reached $11.6 billion, a 62% year-over-year increase. Infrastructure revenue climbed 121% and cloud applications revenue rose 10%. Remaining performance obligations, a measure of contracted future revenue, totaled $664 billion, up $26 billion from the prior quarter.

Oracle said it signed more than $30 billion in additional AI cloud contracts during the quarter. Management reported 850 megawatts of AI compute capacity became operational in the period, three times the capacity delivered in the prior quarter.

The company provided forward guidance for continued growth. Second-quarter revenue is expected to rise 30% to 34%, with cloud revenue forecast to grow 64% to 70%. For fiscal 2027 Oracle set an expectation of at least $90 billion in revenue and raised adjusted EPS guidance to $8.10 from $8.05.

Capital spending remained high. Oracle recorded $28.5 billion in capital expenditures for the August quarter. The company has funded part of its infrastructure buildout with debt and completed a $20 billion at-the-market equity offering.

Analysts responded to the results and guidance with a mix of upgraded outlooks and caution on margins. J.P. Morgan analysts observed that the quarter addressed concerns about backlog sustainability and conversion into revenue. KeyBanc wrote, “We got both better in-period execution and future-period bookings than anticipated. Check and check.” Citi reiterated a Buy rating and wrote that Oracle had “cleared the runway,” characterizing management’s fiscal 2027 framework as conservative. Barclays raised its price target to $252 and kept an Overweight rating, noting reduced uncertainty after the equity offering. Scotiabank and Citizens maintained positive ratings, with Citizens keeping a $285 price target.

Some firms focused on margin and capital intensity risks. Morgan Stanley pointed to pressure on gross margins and described the EPS guidance increase as modest. Stifel lowered its price target to $200 while retaining a Buy rating and projected lower near-term gross margins due to infrastructure costs.

Analysts and investors noted that converting the $664 billion backlog into revenue will depend on continued deployment of new data-center capacity. Oracle’s Investor Day, expected in late October, is scheduled to address data-center timelines, margin outlook and the company’s capital plan.