Investors simply don’t know what to make of Oracle (ORCL 2.28%). The cloud infrastructure and artificial intelligence (AI) provider has reported better-than-expected results for three consecutive quarters, yet the stock sits near where it began 2026.
Expectations were high heading into the company’s quarterly financial report, as investors were hoping to get some insight into the company’s AI-driven future, but things remain as murky as ever, and despite delivering a beat and raise, the stock was down as much as 10% in after-hours trading (as of this writing).
Let’s take a look at the results, how Oracle performed, and why investors shrugged off the results.
Image source: The Motley Fool.
A broken record
To say Oracle reported record results might be an understatement, as the company used the word “record” 20 times in its quarterly financial report. For its fiscal 2026 fourth quarter (ended May 31), both sales and profit growth came in ahead of expectations. Record revenue of $19.2 billion climbed 21% year over year, driving record adjusted earnings per share (EPS) that increased 24% to $2.11.
For context, analysts’ consensus estimates called for revenue of $19.09 billion and adjusted EPS of $1.96, so Oracle surpassed both benchmarks with ease.
Growth in the company’s cloud segment accelerated once again, jumping 47% year over year to a record $9.9 billion and accounting for more than half of Oracle’s total revenue. The vast majority of that increase came thanks to Oracle Cloud Infrastructure (OCI), which competes in cloud computing with the likes of Amazon Web Services, Alphabet‘s Google Cloud, and Microsoft Azure. OCI revenue grew 93% year over year in the current quarter — outpacing all of its larger rivals.
Oracle’s backlog once again made headlines. The company’s remaining performance obligation (RPO) — the value of contracted sales not yet included in revenue — rose to a record $638 billion, surging 636% year over year, after adding $85 billion during the quarter.
The company noted that most of the RPO increase was due to “large-scale AI contracts” in which the customer prepaid Oracle for the purchase of graphics processing units (GPUs) or purchased the GPUs and supplied them to Oracle. The company was quick to remind investors that “This substantially reduces the amount of capital Oracle must raise to build out our AI data centers.”
For the upcoming first quarter, Oracle’s outlook calls for revenue of $19 billion at the midpoint of its guidance, representing year-over-year growth of 28%. The company is also forecasting cloud revenue of $11.6 billion, an increase of 61% at the midpoint, or 60% in constant currency. This would result in adjusted EPS of $1.74, up 19% in U.S. dollars.
Oracle maintained its full-year fiscal 2027 revenue forecast of $90 billion, up 34%, but raised its adjusted EPS forecast to $8.05, representing 18% growth.
Finally, the board of directors declared a dividend of $0.50 payable on July 24 to shareholders of record as of July 10. That works out to a yield of 1%. With a payout ratio of just 40%, there’s still plenty more where that came from.
Today’s Change
(-2.28%) $-4.70
Current Price
$201.11
Key Data Points
Market Cap
$592B
Day’s Range
$198.19 – $212.38
52wk Range
$134.57 – $345.72
Volume
1.9M
Avg Vol
27.2M
Gross Margin
64.30%
Dividend Yield
0.97%
Why is the stock down?
That all sounds like good news, so why is the stock falling? It seems there were two concerns for investors. First, Wall Street was expecting cloud revenue of $9.99 billion, but Oracle fell short at $9.91 billion. In my book, that suggests analysts need to adjust their models to get their estimates closer to reality. However, the second and more likely culprit was Oracle’s plan to raise $40 billion to fund its data center build-out, which the company said would be funded through a mix of equity sales and debt.
Oracle is already saddled with a growing mountain of debt totaling more than $162 billion, with more than $50 billion added over the past year alone to fund its data center build-out, so investors are likely wary of taking on any additional debt. Furthermore, additional stock sales will likely dilute existing shareholders, reducing shareholders’ proportional ownership of the company. That’s rarely taken well by investors.
Moreover, there are still worries about Oracle’s $300 billion of RPO related to OpenAI. Earlier this year, the start-up revealed it was generating $2 billion in monthly revenue, but has yet to turn a profit. As such, investors are concerned that 47% of Oracle’s RPO depends on OpenAI’s success or failure, so it’s viewed with a wary eye. Â
While these issues certainly bear scrutiny, I think the after-hours sell-off is overdone.
Despite its consistently improving performance, Oracle stock is still attractively priced at 25 times forward earnings.
