Oracle Reports Record Revenue and 93% Cloud Growth. Why the Stock Still Fell

Oracle reported Q4 fiscal 2026 results on June 10, and by most measures the numbers were genuinely strong. Total revenue came in at $19.2 billion, up 21% year over year. Cloud revenue hit $9.9 billion, up 47%. Non-GAAP EPS landed at $2.11 against a Wall Street estimate of $1.96, a 7.5% beat. The company called it a record quarter, and on the raw numbers, that holds up.

And yet the stock slid in premarket Thursday. Oracle opened at $201 after closing near $210 the day before. That is not the response you expect to a beat-and-raise quarter, and it says something worth paying attention to: when expectations get stretched far enough, even good results feel like a miss.

What Actually Happened in Q4

The headline numbers are worth stating clearly before getting into the nuance.

Revenue grew 21% to $19.2 billion. Cloud infrastructure, the IaaS business, was the standout, growing 93% to $5.8 billion. That is an extraordinary rate for a business at that scale. Cloud applications (SaaS) grew a more modest 10% to $4.1 billion. Software revenue, the old on-premise business, fell 2% to $6.8 billion, continuing a slow decline that Oracle has been telegraphing for years as customers migrate to cloud.

Operating income on a GAAP basis came in at $6.1 billion, up 20%. Non-GAAP operating income was $8.6 billion, a record, with a 45% non-GAAP operating margin. Net income available to common shareholders was $4.2 billion on a GAAP basis. The non-GAAP number was $6.2 billion.

One thing to flag: the GAAP net income figure in Yahoo Finance’s quarterly data shows $3.72 billion, which is lower than what the press release reports for the quarter ended May 31. This discrepancy comes from how the SEC filing aggregates data vs. what the press release presents. The press release and 8-K are the authoritative source here, and they show $4.2 billion net income available to common shareholders.

For the full fiscal year 2026, Oracle posted $67.4 billion in total revenue, up 17%. Full-year cloud revenue reached $34 billion, up 39%. GAAP EPS for the year was $5.83, up 34%. Non-GAAP EPS was $7.63, up 27%.

The RPO Number Is the Real Story

Remaining Performance Obligations ended Q4 at $638 billion. That is not a typo. It was $553 billion at the end of Q3, which means Oracle added $85 billion in a single quarter.

Year over year, RPO is up 363%.

To understand what is driving this, you have to understand what Oracle has been doing with its large AI contracts. A substantial portion of the RPO increase comes from deals where the customer either prepaid Oracle for GPUs or physically supplied the GPUs themselves. Oracle says the prepaid and customer-supplied hardware component of these contracts now totals $75 billion. This changes the capital equation meaningfully: Oracle does not have to raise money to fund those data centers because the customers already have.

This is an unusual structure and the market is still figuring out how to value it. On one hand, it is strong evidence of genuine demand that customers are prepaying at this scale. On the other hand, it complicates revenue recognition and makes it harder to read the backlog as a traditional forward revenue signal.

The Capital Expenditure Question

Here is where things get complicated, and where the stock reaction makes more sense.

Oracle’s capex for fiscal 2026 was $55.7 billion, up from $21.2 billion in fiscal 2025. That is a 163% increase in a single year. For fiscal 2027, the company expects net capex of around $70 billion, with an additional $20-25 billion paid directly by customers bringing the gross figure to roughly $90-95 billion.

Free cash flow for the full year was negative $23.7 billion. On a trailing four-quarter basis it has been negative since Q1 fiscal 2026 and is getting more negative, not less.

Operating cash flow was $32 billion for the year, up 54%, which is genuinely impressive. But with capex consuming $55.7 billion, the math does not work in the company’s favor right now.

Oracle is funding this through a combination of debt and equity. In fiscal 2026 the company raised $43 billion in debt and $5 billion in equity. For fiscal 2027 it plans to raise roughly $40 billion more through a combination including a previously announced $20 billion at-the-market equity issuance. Total debt as of May 31, 2026 was approximately $130 billion.

The CFO said on the call that Oracle does not expect to issue additional debt in calendar year 2026. That is a meaningful statement given the scale of the capital program, and it implies the equity issuance and customer prepayments are expected to carry more of the load.

Whether this level of investment ultimately pays off depends entirely on whether AI infrastructure demand is as durable as the RPO suggests. If it is, Oracle is building capacity ahead of a decade-long opportunity. If demand softens or large customers slow their prepayments, the debt load will look very different.

Guidance

For Q1 fiscal 2027, Oracle guided for total revenue growth of 27-29% in USD. Cloud revenue growth of 58-64% in USD. Non-GAAP EPS of $1.72-$1.76.

For the full fiscal year 2027, Oracle confirmed its prior revenue guidance of $90 billion and raised non-GAAP EPS guidance to $8.05, representing 18% growth after adjusting for one-time investment gains in fiscal 2026.

The $90 billion revenue target has been on the table for a while and the company is not backing away from it. At $67.4 billion in fiscal 2026 revenue, they need to add roughly $22.6 billion in a single year. That is around 34% growth, which is a step up from the 17% they just delivered.

Cloud infrastructure running at 93% growth is the engine that has to sustain that trajectory. The SaaS business at 10% growth is helpful but not the driver. The software business declining is a known headwind.

Earnings History

Oracle’s recent EPS track record is worth looking at:

The June 2026 quarter came in at $2.11 vs. $1.96 estimated, a beat of 7.5%. Before that, December 2025 was the big one: actual EPS of $2.26 against an estimate of $1.64, a 38% beat. That outsized beat was driven partly by the one-time investment gains Oracle called out in the footnotes, specifically the sale of the Ampere chip business and Bloom Energy warrants. September 2025 was a slight miss at $1.01 vs. $1.05 estimated. The two quarters before that were modest beats.

The pattern is mostly beats, with one miss and one unusually large beat from non-recurring items. Strip out the December one-timer and the beat history is consistent but not dramatic.

Valuation

At the current price around $201, Oracle trades at roughly 36x trailing GAAP earnings and 18.5x forward earnings. Price to sales is about 8.6x on a market cap of $578 billion. Price to book is 17x.

The forward P/E of 18.5x is not outrageous for a company guiding to 18% EPS growth, particularly one with $638 billion in contracted backlog. The PEG ratio sits around 1x, which is in the range where the valuation is reasonable if the growth materializes.

The risk is the capex trajectory. Negative free cash flow of $23.7 billion in a year when operating cash flow is $32 billion is a significant cash drag, and it is getting larger not smaller. If you believe the infrastructure investment generates returns in years 3-5, the valuation today looks attractive. If you think the AI buildout overshoots demand, the debt load and equity dilution from the ATM program become the dominant story.

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What the Market Is Reacting To

The mixed reaction on Thursday was probably a function of a few things.

The revenue number ($19.2 billion) is about what was expected. The cloud infrastructure growth at 93% is exceptional, but some investors were looking for even higher numbers given the RPO trajectory. Software revenue declining 2% is a known story but it is not helpful. The restructuring and other charges hit $823 million in Q4 against $83 million a year ago, a 899% increase, which is a large number that gets attention even if it is partly one-time.

And then there is the capex. $70 billion in net capex guidance for fiscal 2027, with the possibility of $90-95 billion gross, is a big number to sit with overnight.

Oracle’s business is genuinely changing. The IaaS business is growing at a rate that most enterprise software companies would consider science fiction. The question is whether the capital investment required to sustain that growth is being sized correctly. The RPO says yes. The free cash flow says the market will need to take that on faith for a while longer.

All figures sourced from Oracle’s Q4 fiscal 2026 earnings press release, SEC 8-K filing dated June 10, 2026, and Yahoo Finance quarterly statements. This article is for informational purposes only and does not constitute investment advice.