Oracle Corporation (ORCL) — Q1 FY2027 Earnings Call

Call date: September 10, 2026

Source: StockAnalysis transcript (full prepared remarks and Q&A)

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 press 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 (SVP of Investor Relations, Oracle): 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 Sicilia, Chief Executive Officer Clay Magouyrk, 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. 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 will begin with a few prepared remarks. With that, I will turn the call over to Hilary.

Hilary Maxson (CFO, Oracle): Thanks, Ken. Hi, everyone. Great to be here with you all today. 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 are seeing an acceleration in execution across the company, translating into our top and bottom line results. Q1 was another record quarter, driven by strength in both our cloud infrastructure and cloud apps businesses. Total revenue was a record $19.3 billion, up 30% year-over-year in U.S. dollars. 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 is no longer the case. Cloud infrastructure revenue for Q1 was $7.4 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. Our non-GAAP operating income increased 31% in USD to $8.2 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. This all translated to a strong increase in our non-GAAP EPS of +30% in USD, reaching $1.92 for the quarter. Our remaining performance obligations, or RPO, increased $26 billion from Q4. We continued to grow RPO to support future revenues; the vast majority of new contracts were via prepay or bring-your-own-hardware or similar mechanics. We started to see strong conversion of RPO into revenues this quarter. We drove record cash flow from operations of $23 billion in Q1. CapEx was $28 billion, leading to negative free cash flow of $5 billion. Net cash CapEx was $18 billion. We anticipate $90–95 billion in CapEx for the full year, with no more than $70 billion in net cash CapEx. We completed the previously disclosed $20 billion at-the-market equity issuance during Q1.

Mike Sicilia (Co-CEO, Oracle): We continue to see the power of application suites. In Q1, total SaaS business grew 10%, with Fusion growing 14% and industry applications greater than 20%. Customers used embedded AI capabilities more than 150 million times during the quarter, up 42% sequentially. AI agents executed more than 3.5 million times in production, nearly doubling quarter over quarter. Customers have over 2,300 AI agents in production, up 90% quarter over quarter. NetSuite Next became generally available, and more than 10,000 customers were already using NetSuite AI Connector Service.

Clay Magouyrk (Co-CEO, Oracle): OCI delivered 850 megawatts of AI capacity containing more than 300,000 GPUs to customers since the end of Q4. We closed more than $30 billion of additional AI contracts in Q1 without requiring additional capital from Oracle. GPU utilization was 97.9%. Renewed or resold GPU capacity came at a 20% premium to prior contracts. We delivered 131,000 GPUs at Abilene in Q1. Multicloud database revenue grew 353% year over year and multicloud customers grew 180%. Oracle expanded OpenAI, Gemini and Grok relationships, announced a Quantinuum partnership, and expanded AI Data Platform and APEX capabilities.

Hilary Maxson: For Q2 2027, total revenue growth is expected at 30–34%, cloud revenue growth at 65–71%, and non-GAAP EPS at $1.85–1.93. For the full year, we are upgrading guidance to at least $90 billion in total revenue and $8.10 in non-GAAP EPS.

Q&A

Brad Zelnick (Deutsche Bank): How can Oracle slow investment after FY27–FY28 peak CapEx, and when does FCF turn positive?

Clay Magouyrk / Hilary Maxson: Oracle can shift more funding to customer prepayments, supplier financing and bring-your-own-hardware. Management did not give a timing date for positive FCF, but said projects should become strongly cash-generative shortly after ramp, with conversion approaching post-tax EBITDA.

Siti Panigrahi (Mizuho): Are New Mexico and Wisconsin data-center delays a risk to FY27 revenue?

Clay Magouyrk: Both sites are progressing, and FY27 guidance does not depend on them. Delivery is phased, the portfolio is diversified, and neither site affects the previously stated FY27 revenue or earnings guide.

Raimo Lenschow (Barclays): How should investors think about component price increases and gross-margin durability?

Clay Magouyrk: In a demand-exceeds-supply environment, Oracle can charge more to offset higher costs and does not expect component prices to affect gross margins. Renewals have achieved higher prices, supporting demand and profitability.

Mark Moerdler (Bernstein): What drives RPO that does not require additional Oracle cash, and how is sovereign AI developing?

Clay Magouyrk: Structures include supplier financing, customer-funded hardware and upfront prepayments. Demand is broad across startups and investment-grade customers. Alloy sovereign-cloud activity is expanding in Japan and the Middle East.

John DiFucci (Guggenheim): How should investors interpret falling gross margin versus operating margin?

Hilary Maxson: Gross margin is an important health indicator, but operating margin is the key value metric. Gross margin should flatten over the next couple of years as data centers ramp, with more detail expected at the October Investor Day.

Brent Thill (Jefferies): Can Oracle sustain double-digit SaaS growth despite AI disruption?

Mike Sicilia: Oracle's end-to-end application suites, embedded AI, agent studio, AI-assisted go-lives and AI Data Platform are designed to increase customer ROI and make SaaS deployments faster. Management remains optimistic about the applications business.

Kirk Materne (Evercore ISI): Is the AI Data Platform a standalone software opportunity or a driver of database and OCI consumption?

Mike Sicilia: It can be all of the above and is agnostic to data source. Forward-deployed engineers are already helping customers implement it, and it should support applications, OCI and multicloud database growth.

Ken Bond: Oracle expects to announce Q2 FY27 results on December 14, 2026.

Operator: This concludes today's conference. We would like to thank you for your participation. You may now disconnect.