Oracle reported record fourth quarter fiscal 2026 results on Wednesday evening, revenue of $19.2 billion beating estimates, cloud infrastructure revenue up 93 percent, earnings per share of $2.11 beating estimates, remaining performance obligations jumping $85 billion in a single quarter to a staggering $638 billion, and the stock fell approximately 3 percent in after-hours trading anyway.
The reason is the number the Axios article leads with and that is buried in the earnings release under the category of things investors are supposed to celebrate, Oracle burned through $23.7 billion in negative free cash flow in fiscal 2026, spent $55.7 billion on capital expenditures in a single year, up 162 percent, and then told investors it plans to raise an additional $40 billion in debt and equity in fiscal 2027, including a $20 billion share sale already announced.
That follows $43 billion in debt and $5 billion in equity raised in fiscal 2026 alone.
The math the market is doing is straightforward. Oracle's revenue is growing impressively. Its RPO, the backlog of future revenue under contract, is enormous and growing faster than anyone expected. Its cloud infrastructure business is clearly winning AI workloads.
The company is spending and borrowing at a rate that has turned its free cash flow deeply negative, is compressing margins and will continue compressing margins through fiscal 2027, with no clear timeline for when the investment phase ends and the harvest phase begins. Investors are antsy. Antsy looks like a 3 percent after-hours decline on a record quarter.
The Numbers That Should Have Moved The Stock Up
Start with what Oracle actually reported, because it is genuinely strong on every top-line metric.
Total revenue of $19.2 billion for the quarter beat the analyst consensus of $19.1 billion and represents 21 percent year-over-year growth.
For the full fiscal year, Oracle crossed $67 billion in revenue for the first time, $67.4 billion, up 17 percent. Non-GAAP earnings per share of $2.11 for the quarter beat estimates of $1.89 by more than 11 percent.
The cloud infrastructure business, the part of Oracle that is competing directly with AWS, Azure and Google Cloud for the AI workloads that every hyperscaler is racing to capture — grew 93 percent in the fourth quarter.
Ninety-three percent. That is not a business struggling to win customers. That is a business that is growing at a rate that justifies the staggering capital investment being made to support it.
The Remaining Performance Obligations figure is the number that would normally send investors rushing to buy. RPO represents revenue that Oracle has already contracted but not yet recognized, future revenue that is essentially locked in, waiting to be delivered and recognized on Oracle's income statement.
The $638 billion RPO is up 363 percent year-over-year. It grew by $85 billion in the fourth quarter alone, crushing the analyst estimate of $595.67 billion.
Bank of America analysts, who recommend buying Oracle shares, revealed the specific composition of that RPO that makes it so extraordinary.
More than 50 percent of the $638 billion comes from OpenAI alone. A single customer relationship, albeit the most prominent AI company in the world, accounts for more than $319 billion of Oracle's contracted future revenue backlog. The AI buildout is real, it is contracted and it is going through Oracle's infrastructure.
The Spending That Made Investors Nervous
The problem the market is grappling with is not whether Oracle's AI business is working. It clearly is. The problem is how much it costs to make it work, how long the investment cycle lasts and what margins look like while the investment is being made.
Oracle spent $55.7 billion on capital expenditures in fiscal 2026, up 162 percent from the prior year. The company's free cash flow, operating cash flow minus capital expenditures, was negative $23.7 billion for the year.
Cash flow from operations was a strong $32 billion. But when you spend $55.7 billion building data centers while generating $32 billion from operations, the math produces $23.7 billion in negative free cash flow.
Oracle funded that gap with $43 billion in new debt and $5 billion in new equity during fiscal 2026.
The gross margin decline that Oracle guided to for fiscal 2027 is the forward-looking version of the same story. Data centers being built right now are not yet generating revenue at their full capacity.
The depreciation costs associated with the hardware, which nearly doubled to $7.62 billion in fiscal 2026, hit the income statement before the revenue from that hardware fully materializes.
Gross margins step down while the data centers ramp up. Margins recover when the data centers are fully utilized. The question is how long the ramp-up takes and how much debt Oracle accumulates in the meantime.
The $40 billion in additional financing Oracle plans for fiscal 2027, including the $20 billion at-the-market equity issuance already announced, extends the capital raise cycle that is keeping free cash flow deeply negative.
CEO on the earnings call described plans to bring online almost one gigawatt of computing power in the current quarter alone, roughly equal to everything Oracle brought online during all of fiscal 2026. That acceleration is the opportunity. The cost of that acceleration is what is showing up in margins and free cash flow.
The $638 Billion Question
The specific mechanism behind the RPO surge is worth understanding because it changes the capital math in Oracle's favor if it plays out as described.
Most of the increase in Oracle's RPO backlog in the third and fourth quarters of fiscal 2026 came from large-scale AI contracts in which the customer either prepaid Oracle for GPUs or bought and supplied the GPUs to Oracle themselves.
Both structures reduce the amount Oracle needs to spend on hardware for those projects, the customer is supplying the capital-intensive equipment that would otherwise require Oracle to borrow money to buy.
If the trend toward customer-supplied or prepaid GPU contracts continues, Oracle's capital expenditure requirements for future data center buildout become less dependent on its own balance sheet and more dependent on customer prepayments.
That dynamic, if it scales, changes the free cash flow picture materially without requiring Oracle to slow its growth.
Whether it scales is the question the market is sitting with. The RPO growth is real. The customer concentration in OpenAI is real.
The commitment to $40 billion in fiscal 2027 financing is also real. Oracle beat estimates on every reported metric Wednesday evening. The stock is down anyway because the spending story is the story investors are watching and the spending story does not yet have a clear ending.
FY2027 revenue guidance of $90 billion, 34 percent growth, and cloud revenue expected to grow 58-64 percent in Q1 are the numbers that say the revenue side of this story is intact. The capital bill that is funding those numbers is the number that produced a 3 percent after-hours decline on a record quarter.