After the U.S. stock market closed on June 10, 2026, Oracle (ORCL.US) released its financial results for the fourth quarter of fiscal year 2026, ending May 31. On paper, the numbers were nearly flawless—a report card few could fault. Revenue reached $19.2 billion, up 21% year-over-year, beating analysts’ expectations of $19.1 billion. Non-GAAP earnings per share came in at $2.11, far exceeding the consensus estimate of $1.96. Non-GAAP operating income hit $8.6 billion, a 22% increase and a new all-time high. For the full year, revenue surpassed $67 billion for the first time, non-GAAP operating income reached $29 billion, and operating cash flow totaled $32 billion—a 54% jump from last year’s $20.08 billion.
Yet the market responded in stark contrast. Following the earnings release, Oracle’s share price plunged more than 10% in after-hours trading and dropped another 8.5% the next trading day. As of June 16, ORCL closed at $189.60.
"Blockbuster results + falling share price"—this phenomenon is not unique. It signals a structural shift in how the market values AI-related stocks: the focus is moving from "AI narrative premium" to a new phase of "AI investment return validation."
$638 Billion in RPO: Real Demand, but Uncertain Realization Timeline
The most exciting metric for management in this report was remaining performance obligations (RPO). This quarter, RPO soared to $638 billion, up a staggering 363% year-over-year and far above the average analyst estimate of $595.67 billion. In Q4 alone, Oracle signed $67 billion in AI infrastructure contracts, and the total value of "prepaid or bring-your-own-hardware" contracts now stands at $75 billion.
What does $638 billion represent? For comparison, Oracle’s total revenue for FY2026 was $67.4 billion—meaning undelivered orders are more than nine times annual revenue. A year ago, this figure was about $138 billion. Most of these orders come from large, prepaid AI contracts, including deals where customers purchase Nvidia GPUs themselves and entrust Oracle to manage them.
But the market isn’t buying it. CFO Hilary Maxson, for the first time, provided a timeline for RPO recognition: about 12% (roughly $76.56 billion) is expected to be recognized as revenue in the next 12 months, and another 34% (around $216.9 billion) in the following 13 to 36 months. In other words, even with unprecedented order backlogs, revenue realization will be gradual. The time lag between order growth and actual revenue recognition is a key variable driving the market’s valuation reassessment.
Capex "Unleashed": $55.66 Billion and Another $70 Billion to Come
The real trigger for the sell-off was capital expenditure (Capex). For fiscal 2026, Oracle’s Capex hit $55.66 billion, up 162% year-over-year and well above the prior $50 billion guidance. In Q4 alone, Capex was about $16.5 billion.
Investor concerns deepened with the forward guidance. The company expects net cash Capex for fiscal 2027 to be about $70 billion. Including the impact of customer prepayments and other timing factors, total Capex on a reporting basis is projected to range between $90 billion and $95 billion. Management confirmed that fiscal 2027 and 2028 will mark the peak of capital spending.
This unprecedented expansion comes at a steep cost. Free cash flow for FY2026 was negative $23.7 billion. Total debt and equity financing exceeded $48 billion for the year. To support its FY2027 investment plan, Oracle expects to raise about $40 billion through debt and equity, including a previously announced $20 billion at-the-market (ATM) equity offering.
Dilution risk—this is becoming a central concern in AI trades. Even with a $638 billion order backlog, the market is voting with its feet, fundamentally worried that Oracle’s AI infrastructure expansion relies almost entirely on external financing. Any slowdown in AI demand or delays in order delivery could quickly bring financial pressures to the surface.
Oracle vs. AWS/Azure: Who Offers Better AI Investment Returns?
To assess whether Oracle’s AI investment thesis holds up, it’s important to view it within the broader landscape of cloud infrastructure competition.
In the first quarter of 2026, the global cloud infrastructure services market reached $128.6 billion, up 35% year-over-year. The "Big Three" providers maintained their dominance: AWS with about 28% market share, Microsoft Azure at 21%, and Google Cloud at 14%.
AWS: Largest scale, accelerating growth. AWS posted Q1 2026 revenue of $37.6 billion, up 28% year-over-year—the fastest growth in 15 quarters. Operating income reached $14.2 billion, with an operating margin of 37.8%. AWS’s strength lies in its sheer scale and profitability, but AI revenue accounts for only about 10% of total revenue, lower than GCP’s 36% and Azure’s 27%.
Azure: Leading growth, deepest AI penetration. Azure and other cloud services grew 40% year-over-year in Q3 FY2026 (ending March 31, 2026), maintaining a 39%-40% growth range for several consecutive quarters. Azure currently handles 53% of application workloads, and nearly 90% of CIOs say they plan to adopt Microsoft’s generative AI products in the next 12 months. Azure’s AI revenue share has reached 27%, the highest monetization rate among the three. However, Azure’s growth is still limited by compute supply, though expansion is expected to accelerate in the second half of the year as capacity increases.
Oracle OCI: Smallest scale, fastest growth. OCI posted Q4 revenue of $5.8 billion, up 93% year-over-year. Its scale is only about 15% of AWS, but its growth rate is more than three times higher. Oracle has signed contracts with core AI players such as OpenAI, Meta, and Nvidia. However, OCI’s smaller scale means a greater burden from unit economic effects—this is the underlying reason for surging Capex and negative free cash flow.
The core difference among the three lies in capital efficiency. AWS generates $14.2 billion in operating income at a 28% growth rate and a 37.8% margin. Azure delivers steady profits at 40% growth. In contrast, Oracle OCI’s 93% growth comes with a $23.7 billion free cash flow deficit. In its pursuit of growth, Oracle is paying a much higher price in capital efficiency than its more mature peers.
What Do Analysts Think?
Despite the sharp drop in share price, Wall Street remains broadly optimistic. A consensus of 43 analysts rates Oracle as a "Buy," with an average price target of $255.95. Mizuho maintains an "Outperform" rating and a $320 target. HSBC cut its target from $345 to $316 but kept a "Buy" rating. UBS also maintains a "Buy" rating, with a $285 target.
The bullish case centers on management’s clear guidance that Capex will peak in fiscal 2027/2028. The "bring-your-own-hardware" and prepayment models are expected to help Oracle gradually transition to self-funded growth. The FY2027 revenue target stands at $90 billion, implying about 34% year-over-year growth.
But caution flags remain. HSBC lowered its Oracle FY2030 revenue forecast from $244 billion to $205 billion, and its non-GAAP EPS estimate from $19.24 to $17.81. Even the most optimistic analysts admit that the financial pressure of peak Capex will continue to weigh on valuations for the next 12–18 months.
Investment Insights: Capture AI Cloud Opportunities Seamlessly on Gate
For investors looking to participate in the AI cloud infrastructure story, Oracle’s earnings offer valuable signals—the demand for AI is real and strong, but the capital-intensive expansion model is facing much stricter market scrutiny on returns. This pattern of "outperforming results + pressured stock price" could also play out among other major cloud providers like AWS and Azure.
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Conclusion
Oracle’s Q4 earnings paint a clear picture: demand for AI infrastructure is real and accelerating—$638 billion in RPO is the strongest evidence. But the market is no longer satisfied with the "how many orders" narrative, and is now asking, "how efficient is the profit?" The $55.66 billion in Capex, $23.7 billion free cash flow deficit, and $40 billion in new financing plans—all these figures underpin the market’s anxiety.
Oracle is not alone. AWS, with 28% growth, and Azure, with 40% growth, are also seeking balance between massive capital expenditures and actual returns. Each of the three cloud giants has chosen a different path: AWS bets on steady-state balance between scale and profit, Azure focuses on deep monetization of the AI application layer, while Oracle is aggressively ramping up Capex to close the scale gap. Which company will deliver better AI investment returns ultimately depends on whether investors prioritize growth or efficiency.
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