<p>Oracle Q4 Earnings Analysis</p>

Core Financial Data (Q4)

• Total Revenue: $19.2bn (+21% YoY), slightly beating estimates

• Non-GAAP EPS: $2.11 (+24%), significantly beating analyst estimates of $1.95

• Total Cloud Revenue: $9.9bn (+47%), now accounting for half of total revenue

◦ IaaS (OCI Cloud Infrastructure): $5.8bn (+93%), driven by AI compute demand, the biggest highlight of the quarter

◦ SaaS Cloud Applications: $4.1bn (+10%), legacy software business growth remains sluggish

• RPO (Remaining Performance Obligations): $638bn (+$85bn QoQ, +363% YoY)

◦ Of which $75bn are large AI orders: Customers prepaying for GPUs, or even providing their own GPUs to be hosted in Oracle data centers, helping Oracle alleviate capital pressure for GPU purchases

FY2026 Full Year

• Total Revenue: $67.4bn (+17%); Cloud Business: $34bn (+39%)

• Operating Cash Flow: $32bn (+54%), but Free Cash Flow at -$23.7bn

• Capex reached $55.7bn, with aggressive spending on AI data centers and GPU acquisitions

• Rising debt levels: FY2026 raised $43bn in debt + $5bn in equity financing; FY2027 plans another $40bn raise

Next Quarter Guidance Q1 FY2027

• Total Revenue Growth: 27-29%

• Cloud Business Growth: 58-64%, maintaining high speed

• Non-GAAP EPS: $1.72-1.76

• Maintaining FY2027 full-year revenue target of $90bn, raising EPS guidance to $8.05

Why did the stock drop after hours despite good earnings? 3 Market Concerns

IaaS Dragging Down Overall Gross Margin
IaaS is a capital-intensive industry requiring continuous GPU purchases and data center construction, with gross margins far lower than traditional software licensing. As IaaS proportion grows, overall margins face pressure; although revenue surges, profitability efficiency declines.

Free Cash Flow Turns Negative, Debt Pressure Rises
The old Oracle was a high free cash flow software stock; it has now transformed into a cloud infrastructure capital-intensive enterprise. While RPO backlog is substantial, RPO does not equal recognized profit—it will be converted to revenue over time, whereas capex burns cash immediately. Credit rating is only BBB-, near junk bond territory, with downgrade risk due to excessively high leverage.

SaaS Growth Weakness (Only 10%)
Traditional software, NetSuite, and Cerner healthcare businesses are growing too slowly; company growth relies almost entirely on OCI cloud infrastructure, increasing single-source risk.

Brief Summary

Oracle is transitioning from a traditional enterprise software company to an AI cloud infrastructure firm.
The revenue growth story is strong, but the cost is exploding capex, deteriorating free cash flow, and pressured margins.
The market is currently pricing in: whether these large AI orders can ultimately translate into high profits, or if they are merely burning cash to grab market share.