Oracle beats Q4 estimates but stock drops on $20B raise plan

Oracle reported better-than-expected earnings and revenue for its fiscal fourth quarter while raising its profit forecast, yet its stock dropped 5% in extended trading as the company plans to raise an additional $20 billion in equity and debt to finance its AI buildout.

Oracle exceeds consensus estimates. The company posted adjusted earnings per share of $2.11 compared with $1.96 expected by LSEG consensus. Revenue reached $19.18 billion against the $19.10 billion forecast.

Revenue increased 21% year over year in the quarter ended May 31. Net income rose to $4.22 billion, or $1.45 per share, from $3.43 billion, or $1.19 per share, a year ago. Adjusted earnings exclude the impact of stock-based compensation.

Full-year guidance holds steady with higher profit outlook. Oracle maintained its previous revenue guidance of $90 billion for fiscal 2027. It lifted its forecast of adjusted earnings per share to $8.05, above analysts' projection of $8.01 per share and $88.90 billion in revenue.

For the fiscal first quarter, Oracle called for adjusted earnings per share of $1.72 to $1.76 with revenue growth of 27% to 29%. Analysts polled by LSEG had been expecting $1.68 in adjusted earnings per share along with $19.06 billion in revenue, implying about 28% growth.

Cloud revenue accelerates while financing concerns mount. Revenue from cloud offerings increased 47% to $9.91 billion. Cloud infrastructure revenue jumped 93% to $5.8 billion. Software revenue, including licenses and support, totaled $6.82 billion, down 2%.

Oracle said it foresees raising $40 billion through debt and equity financing, including a $20 billion share sale announced earlier. That's after raising $43 billion in debt and $5 billion in equity in fiscal 2026. The company reported $23.7 billion in negative free cash flow for the fiscal year.

Remaining performance obligation surges on AI deals. Oracle's remaining performance obligation reached $638 billion on May 31, up 363%. Most of the RPO increase in both Q3 and Q4 were large scale AI contracts where the customer prepaid Oracle for the purchase of the GPUs, or the customer bought and supplied the GPUs to Oracle. The two mechanisms lower the sum Oracle will need for data center construction.

Bank of America analysts, who recommend buying Oracle shares, said over 50% of the remaining performance obligation comes from OpenAI. During the quarter, Oracle hired Schneider Electric executive Hilary Maxson to be its new chief financial officer. Related Digital and Blackstone said they secured funding for a $16 billion Oracle data center site in Michigan.