Surged by 10% after hours! Oracle reports strong earnings, and robust AI orders temporarily ease market concerns

On Tuesday Eastern Time, American software giant Oracle announced strong quarterly earnings and raised its revenue forecast for fiscal year 2027. Its stock price temporarily surged over 10% in after-hours trading, but the gains have since narrowed to 8% as of press time.

Oracle’s stock has halved over the past six months.

Oracle’s Earnings Surpass Expectations

The financial report shows that for the third quarter ending February 28, the company’s performance compared to analyst consensus was:

• Adjusted earnings per share: $1.79, expected $1.70
• Revenue: $17.19 billion, up 22% year-over-year, expected $16.91 billion

Oracle expects its fourth quarter to have an adjusted EPS of $1.92 to $1.96, well above the analyst expectation of $1.70. The company also forecasts revenue growth of 19% to 20%, aligning with the analyst consensus of 20%.

Oracle projects that for the fiscal year ending in May 2026, revenue will reach $67 billion. Additionally, Oracle’s executives raised the revenue forecast for fiscal year 2027 by $1 billion to $90 billion, surpassing the $86.6 billion previously estimated by analysts surveyed by LSEG.

The company reported that its cloud business (including Infrastructure as a Service, IaaS, and Software as a Service, SaaS) generated $8.9 billion, up 44% year-over-year, exceeding the $8.85 billion forecast by analysts. Among these, cloud infrastructure revenue reached $4.9 billion, an 84% increase, faster than the 68% growth in the previous quarter.

Is Oracle a Disruptor in the AI Wave?

Since September last year, Oracle’s stock has plummeted over 50%. As of this Tuesday’s close, the stock has fallen 23% since the start of the year, while the S&P 500 index has declined less than 1% in the same period.

Wall Street worries that software companies like Oracle may have their businesses overtaken by artificial intelligence, and there are also concerns about the company’s large debt load (used for AI development).

However, Oracle co-founder and Executive Chairman Larry Ellison believes Oracle does not belong to the category of software companies vulnerable to AI disruption—in fact, he sees Oracle as a “disruptor”:

“Thank God, we now have these programming tools that allow us to build comprehensive software systems, including agent-based software, to create and automate entire ecosystems like healthcare or financial services,” Ellison said during a conference call with analysts. “That’s what we’re doing at Oracle. That’s why we see ourselves as disruptors. That’s why we believe the AI wave that disrupts other companies doesn’t apply to us.”

Can Market Concerns Be Alleviated?

However, market worries may be hard to fully dispel.

The earnings report shows that although Oracle has secured large cloud infrastructure contracts with AI companies like OpenAI, its cash reserves are smaller than larger competitors like Amazon and Microsoft. Moreover, Oracle’s free cash flow over the past 12 months has been negative, totaling $13.18 billion.

Additionally, Oracle’s short-term “burning money for expansion” momentum remains strong: the company announced plans to raise $45 billion to $50 billion in the next fiscal year to expand its cloud infrastructure capacity. CEO Clay Magouyrk stated during the call that over the next three years, the company plans to deploy more than 10 gigawatts of computing power.

Nevertheless, the strong quarterly performance may help soothe anxious investors, at least based on current market reactions.

Oracle’s performance and order backlog also indicate that demand for AI infrastructure continues to grow. Oracle’s remaining performance obligations (RPO) increased fourfold year-over-year to $553 billion—slightly below the $556 billion analysts expected—and the company stated it has sufficient funds to support this growth.

In its statement, Oracle said:

“Q3 RPO growth was mainly driven by large AI contracts, and in such contracts, Oracle does not expect to need additional funding to support these agreements, as most of the required equipment is either prepaid by customers for GPU purchases or provided by customers themselves.”

Industry estimates suggest that OpenAI, TikTok, and xAI are among Oracle’s largest clients. Oracle stated in its Tuesday announcement: “Some of the largest AI cloud service users have recently significantly strengthened their financial positions.”

At the end of February, OpenAI announced a new funding round worth up to $110 billion, supported by Amazon and NVIDIA.

Additionally, there are reports that Oracle is planning layoffs. The company responded in a statement: “AI models used for generating computer code have become highly efficient, so we are restructuring our product development teams into smaller, more agile, and more efficient groups… This new AI code generation technology allows us to develop more software in less time with fewer people. Oracle is now developing more SaaS applications for more industries at lower costs.”