Oracle posts record Q1 revenue, lifts cloud growth

On Thursday, Oracle (NYSE: ORCL ) discussed first-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. 3 billion, up 30% year over year, driven by strong performance in cloud infrastructure and applications.

4 billion, supported by new megawatt capacity and strong demand for compute and database services. 2 billion, with a flat operating margin of 42%, despite a decline in gross margin due to data center ramp-up. The company completed a $20 billion equity issuance, with CapEx expected to reach $90 to $95 billion for the year, primarily for infrastructure expansion. Oracle's SaaS business experienced 10% growth, with strong performance in Fusion and industry-specific applications, supported by AI integration.

93. Oracle is investing in AI capabilities, with significant customer adoption of AI agents and the introduction of new AI-powered offerings across its product suite. Full Transcript OPERATOR Good day, everyone, and welcome to the Oracle Corporation first quarter fiscal year 2027 earnings call. Just a reminder that this call is being recorded.

If you have a question today, please star one on your telephone keypad. Please limit yourself to one question. I would now like to hand the conference over to Mr. Ken Bond, head of Investor Relations.

Please go ahead, sir. Ken Bond, Head of Investor Relations Thank you, Miriam, and good afternoon, everyone, and welcome to Oracle's first quarter fiscal year 2027 earnings conference call. On the call today are Chief Executive Officer Mike Cecilia, Chief Executive Officer Clay McGurk, and Chief Financial Officer Hilary Maxson. A copy of the press release, including financial results tables and supplemental financial metrics and guidance, is now available on our investor relations website.

Also available on our website is the slide deck that will be used in this call and a GAAP to non-GAAP reconciliation. As a reminder, today's discussion will include forward-looking statements, and we will discuss some important factors relating to our business. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today. As a result, we caution you from placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments.

And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks, and with that I'll turn the call over to Hilary. Hilary Maxson, Chief Financial Officer Thanks, Ken. Hi, everyone.

Great to be here with you all today. And like Ken said, you can follow along with our remarks in the earnings slide deck on our website and via the webcast. If I had to describe this quarter in one word, I think it would be acceleration as we're seeing an acceleration in execution across the company, translating into our top, top and bottom line results. Q1 was another record quarter, driven by strength in both our cloud infrastructure and cloud apps businesses.

3 billion, up 30% year over year in US dollars. And for the first time, Q1 total revenue grew sequentially, an important sign of our continued progress in building scaled infrastructure. Historically, a record Q4 was followed by a lighter Q1, but as we accelerate across the full technology stack from infrastructure to database to software, that's no longer the case. 4 billion, up 121%, reflecting strong execution as we brought record levels of new megawatt capacity online, supported by a continued strong demand environment for compute and our database services.

Cloud apps were up 10% with Fusion and our industry apps tracking well above that, and Mike and Clay will give more details on those businesses in just a moment. 2 billion, driven by strong revenue progression boosted by operating leverage. Our gross margin did decline as expected, driven by impacts from ramping up our data centers and the acceleration of infrastructure revenue. However, this was offset in the quarter by lower operating costs and strong operating leverage tied to simplification and efficiency actions.

Net net, our operating margin remained around flat for the quarter at 42% on a non-GAAP basis. 92 for the quarter. The last point I'll make on our financial highlights is that our remaining performance obligations, or RPO, increased $26 billion from Q4. There are two things happening here.

First, we continued to grow our RPO during the quarter to support future revenues, and the vast majority of those new contracts were via prepay or bring-your-own-hardware or similar mechanic, so won't require incremental capital from Oracle. Also, that new RPO won't impact our CapEx or revenues until fiscal 28 or beyond. Second, we started to see a strong conversion of our RPO into revenues this quarter, driving our cloud infrastructure results. We've added a few slides here where you can see that strong inflection point in our RPO converting into revenues and operating profits.

First, in cloud infrastructure revenues, I already mentioned the plus 121% growth for this quarter, and that's after a Q4 of plus 93%, and we'd expect acceleration to continue in the remainder of fiscal 27 as we convert more RPO into revenues. We now expect around half of our RPO to convert into sales over the next 36 months. Next, not surprisingly, you can see the acceleration in our total company revenues here shown on a trailing twelve-month basis, driving growth in Q1 to 5 points higher than our Q4 as cloud infrastructure accelerates and becomes a larger and larger contributor.

Lastly, our growth in operating income, also on a trailing twelve-month basis, shows a similar strong acceleration from 16% to 21% between Q4 and Q1. Now to our balance sheet and cash flows. We drove record cash flow from operations of $23 billion in Q1, again reflecting our strong execution against a backdrop of strong demand as well as collection of customer prepayments. Our CapEx for the quarter was $28 billion, leading to negative free cash flow of $5 billion, and our net cash CapEx, so net of prepayments, was $18 billion for the quarter.

To note, our CapEx will not be linear throughout the year. We continue to anticipate $90 to $95 billion in CapEx for the full year, with not more than $70 billion in net cash CapEx. Lastly, we're quite pleased to announce that we completed our previously disclosed $20 billion at-the-market equity issuance in entirety during Q1. With that, let me turn the call over to Mike and then Clay to get into more details on our cloud apps and infrastructure businesses.

Mike Cecilia (Chief Executive Officer) Thanks, Hilary. I'll start with some additional color on the Applications Business. We continue to see the power of application suites in the minds of our customers. They are investing in trusted, complete solutions that now seamlessly blend agents and applications together to run their businesses.

The introduction of AI is an accelerator, not a replacement for packaged applications. As such, our decades of experience and expertise running business processes across every industry in every geography for organizations of any size gives us the understanding of how to help them succeed. Before AI came along, application suites had already proven their effectiveness. Companies had been able to increase their profit margins because end-to-end automation was standardized and efficient.

Business processes proved to be much more effective than one-off custom solutions, but that did require organizations to follow workflows and processes as designed in the system, something that many struggle to achieve consistently across functions, teams, and regions. AI changes this dynamic. Rather than asking every employee to navigate and execute a process exactly as the system expects, AI agents can perform tasks using the organization's established workflows and business rules. Employees then shift to overseeing agents, resolving exceptions, and applying human judgment where it matters most.

By combining applied AI with decades of sophisticated business rules, regulatory compliance, security models, data models, and customer configurations, we enable customers to continuously realize AI's value while keeping their data secure and their operational guardrails intact. This allows organizations to harness the power of our application suites more easily than ever before. We are incredibly confident in the potential for this new paradigm to deliver much more rapid ROI for our customers. At AI World in October, we will unveil a new agentic AI accelerator poised to redefine how customers deploy Oracle applications faster, simpler, and at a dramatically lower cost.

Working alongside Oracle and customer teams, AI agents will automate and orchestrate implementation at an unprecedented scale, compressing SaaS deployments from years to months and months to weeks. It's really the power of these things together that reinforced my belief that the growth of our applications business is only going up from here. In Q1 we had a strong quarter in many of our SaaS offerings, driven by the demand environment that I just described. In total, our SaaS business grew 10%, with Fusion growing at 14%.

Our Oracle Health business continued to accelerate, and although we don't specifically call it out, our industry applications grew at greater than 20% in Q1. As I mentioned last quarter, NetSuite saw some slower decision cycles last fiscal year and therefore the growth is a little lower than the rest. But we have an exciting new product generally available that I'll speak about in just a bit. Now, a few customer callouts from a much longer list in the quarter.

Uber Technologies, Stanford University, and Mitsubishi UFG Bank in Japan all went live and/or accelerated their usage of Fusion. Pipar, Fire and Safety chose Oracle's complete application suite, from industry apps to Fusion, including Fusion agentic applications. Johnson Controls, the Saudi National Bank, GuideWell Mutual Holding Corporation, a health solutions company serving more than 45 million people, and Petronas, Malaysia's national energy company, each added Fusion agentic applications this quarter to drive better outcomes. And let me share just a few stats around our embedded AI usage and progress in the quarter.

Customers used our embedded AI capabilities more than 150 million times during the quarter, with usage growing 42% sequentially. 5 million times in production during the quarter, nearly doubling quarter over quarter. Customers have over 2,300 AI agents in production, and that's up 90% quarter over quarter. Overall AI production usage across Fusion alone consumed 900 billion tokens during the quarter.

I think it's fair to say that customers are using our AI built into our Fusion applications and our application stack every day. Now, turning to NetSuite, we're announcing the general availability of our new AI-powered offering called NetSuite Next. This presents an agentic experience that is simpler, more powerful, and it's infused with AI across the workflows that customers rely on every day. It's easier to adopt, it's more productive from day one, and it's more valuable as customers grow.

Additionally, the NetSuite AI Connector service, which lets customers securely connect their NetSuite data to leading AI assistants of their choice, including ChatGPT and Claude, is already one of the fastest adopted capabilities in the entire history of NetSuite, with more than 10,000 customers already using it. Personal care company Every Man Jack estimates that the service alone will save $350,000 annually and nearly 5,000 hours of work. This month at our local Health and Life Sciences customer event, we will debut our all-new agentic care management system alongside a world-class lineup of external speakers.

More than an EHR, this system connects clinical research and care delivery, reduces the burden of records management for patients, and enables providers to practice at the top of their license. With AI as a user interface, there are a few AI missions that matter more: helping deliver better care while freeing providers to focus on what matters most—their patients, not computer systems. The proof points around Oracle's AI offerings are definitive, and we remain confident in the opportunity ahead. And with that I'll turn it over to Clay.

Clay Magouyrk, CEO, Oracle All right, thanks Mike. OCI continues to grow quickly by delivering the capacity our customers need. We delivered 850 megawatts of AI capacity containing more than 300,000 GPUs to customers since the end of Q4. Delivery in Q1 is almost three times what we delivered in all of Q4 and 73% of the total capacity we delivered last fiscal year.

This reflects years of investment in every aspect of infrastructure, from data center design through supply chain and manufacturing to installation and operations. Customer demand continues to support this investment. We closed more than $30 billion of additional AI contracts in Q1 without requiring additional capital from Oracle. Our ability to operate a large multi-tenant fleet remains a significant advantage.

9% in Q1. GPU longevity and value continue to impress. Of all the GPUs that came up for renewal in Q1, that capacity was renewed or resold at a 20% premium to prior contracts. The majority of those GPUs are four years or older.

We see a long useful life with increasing value for the AI capacity we're deploying. Abilene continues to deliver at an extraordinary pace. 9 times the volume delivered in Q4. Six of the eight campus buildings representing 618 megawatts and 75% of total capacity have now been delivered to the customer.

Customer acceptance has compressed to only 24 hours, showing that the systems arrive ready for customer workloads. The recently released GPT-6 Astra was trained at our site in Abilene. Shackelford is our next gigawatt-scale campus and is progressing well. Nvidia Vera Rubin systems are performing better than expected across hardware quality, manufacturing yield, and performance.

We will deliver our first Vera Rubin systems to customers in Q2. Our database cloud business is also growing quickly. Multi-cloud database revenue grew 353% year over year and multi-cloud customers grew 180% year over year. We completed our planned Azure and AWS regional footprint expansion, reaching 70 multi-cloud database regions and 119 availability zones.

This gives customers a consistent way to run Oracle AI Database next to their applications and data in the cloud they choose. We also made Oracle Interconnect for AWS generally available. With this launch, OCI now has private high-speed connections to all hyperscalers with no data transfer charges. That makes it easier for customers to build distributed applications and migrate workloads across clouds.

The pace of AI innovation is increasing across the ecosystem. We expanded our OpenAI relationship to offer OpenAI API access, ChatGPT for Work, and Codex through Oracle Marketplace, including GPT-6 Astra. We are bringing Gemini models to Oracle's enterprise applications and we released new Grok reasoning, multimodal, and text-to-speech models. We also continue to expand the open-source model catalog, including new models from Nvidia, Cohere, Google, DeepSeek, and others.

We announced a multi-year partnership with Quantinuum to offer its Helios quantum computer through OCI. Helios will operate in a US-based OCI AI data center, enabling hybrid quantum and AI workloads for enterprise research and AI customers. 1 brings these infrastructure, database, and model capabilities together for application developers. APEX already runs more than 2 million active applications, with thousands more added every day.

APEX Laying is a new technology that represents an APEX application as structured, human-readable application definitions that can be stored in source control, validated, and governed. AI coding agents generate and modify those missions while the APEX engine continues to provide the security, reliability, and operational controls required for enterprise applications. Developers gain the speed of generative development without the downsides of difficult-to-maintain, opaque application code. We are taking the same approach with the Oracle AI Data Platform.

AI Data Platform is now integrated with Codex and Claude Code, allowing developers to work with AI Data Platform data, knowledge, and capabilities from the coding environments they already prefer. We are also adding advanced MLOps capabilities and working with early launch customers on business knowledge models, Semantic Region Engine, and Deep Insight agents. These capabilities ground AI in the meaning of an enterprise with context, semantics, and governance. They also bring AI-driven analysis into Fusion Data Intelligence and Oracle Analytics Cloud, where many customers already manage their most important business data.