Oracle's Cloud Infrastructure Revenue Surges 93% as Backlog Swells to $638 Billion
The software maker's remaining performance obligations ballooned 363% year-over-year to $638 billion, underscoring the scale of AI-driven demand.
Oracle Corp. (ORCL) posted a 93% year-over-year surge in cloud infrastructure revenue for its fiscal fourth quarter, the fastest pace in at least four quarters, as the company's bet on artificial intelligence datacenters continued to reshape its business. The result pushed total revenue to $19.2 billion, up 21% from a year earlier and representing the highest quarterly sales in the company's history.
The quarter marked a structural inflection for Oracle's revenue mix. Cloud services accounted for 52% of total revenue, up from 43% a year ago, while legacy software revenue fell to 35% from 44%. That shift accelerated as on-premise software sales declined 2% year-over-year, reversing a 3% gain in the prior quarter. Cloud infrastructure, or IaaS, reached $5.8 billion, while cloud applications grew a more modest 10% to $4.1 billion, decelerating from 13% in the third quarter.
The backlog numbers dwarfed the quarterly results. Remaining performance obligations — contracted revenue not yet recognized — climbed to $638 billion, up 363% year-over-year and $85 billion higher than the third quarter alone. Oracle disclosed that prepaid and customer-supplied hardware portions of large AI contracts now total $75 billion, a figure that substantially reduces the company's own capital requirements for datacenter buildout. The Oracle Multicloud AI Database, which the company has described as its fastest-growing business ever, expanded 404% in the quarter.
Profitability held up despite the spending surge. Non-GAAP operating income reached a record $8.6 billion, up 22%, with the non-GAAP operating margin expanding to 45% from 44% a year ago. Non-GAAP earnings were $2.11 a share, up 24%; excluding one-time investment gains, the figure would have been $2.03, a 20% increase. Sales and marketing expense continued to shrink as a share of revenue, falling to 11% from 15% a year earlier, while restructuring charges spiked to $823 million, nearly ten times the year-ago level.
The capital intensity of Oracle's AI push remained the dominant financial theme. Property, plant and equipment nearly doubled to $100 billion at fiscal year-end from $43.5 billion a year earlier. For the full fiscal year, operating cash flow surged 54% to a record $32 billion, but free cash flow remained deeply negative at $23.7 billion as capital expenditures of $55.7 billion over the trailing four quarters consumed all of that and more. Interest expense jumped 47% in the quarter, reflecting the $43 billion in debt Oracle raised during the fiscal year to fund the expansion.
For the full fiscal year 2026, revenue grew 17% to a record $67.4 billion, with cloud revenue up 39% to $34 billion and infrastructure-as-a-service climbing 77% to $18.1 billion. GAAP net income grew 37% to $17.1 billion, outpacing revenue growth partly because of a $3.5 billion swing in non-operating income from investment gains including the sale of its Ampere stake.
Oracle projected a significant acceleration ahead. First-quarter fiscal 2027 guidance calls for total revenue growth of 27% to 29% and cloud revenue growth of 57% to 64%, both representing a step-up from the fourth quarter's pace. The company confirmed its full-year fiscal 2027 revenue target of $90 billion and raised non-GAAP EPS guidance to $8.05, an 18% increase after adjusting for one-time items in fiscal 2026. Oracle also disclosed plans to raise roughly $40 billion more in fiscal 2027, including a $20 billion at-the-market equity issuance, while signaling no additional debt is expected in calendar 2026.