Oracle Q3 boosted by AI cloud surge & USD $553bn RPO

Oracle reported double-digit revenue and profit growth for the fiscal 2026 third quarter, driven by a sharp rise in cloud infrastructure sales and a surge in contracted backlog tied to AI work.

Total revenue rose 22% year-on-year to USD $17.2 billion. Cloud revenue, defined as infrastructure and applications combined-increased 44% to USD $8.9 billion.

GAAP operating income was USD $5.5 billion, while GAAP net income was USD $3.7 billion. GAAP earnings per share rose 24% to USD $1.27.

On a non-GAAP basis, operating income was USD $7.4 billion, up 19%. Non-GAAP net income was USD $5.2 billion, up 23%, and non-GAAP earnings per share increased 21% to USD $1.79.

Oracle said that this Q3 was the first quarter in over 15 years where organic total revenue and non-GAAP earnings per share both grew at 20% or more in USD.

Software revenue rose 3% to USD $6.1 billion. Oracle also reported short-term deferred revenue of USD $9.9 billion.

Cloud mix

Growth was led by Oracle Cloud Infrastructure, reported as infrastructure-as-a-service revenue. IaaS revenue rose 84% to USD $4.9 billion.

Cloud application revenue, reported as software-as-a-service, was USD $4.0 billion, up 13%.

Within SaaS, Fusion Cloud ERP revenue was USD $1.1 billion, up 17%, while NetSuite Cloud ERP revenue was also USD $1.1 billion, up 14%.

Oracle also disclosed performance for Oracle Cloud Database revenue within IaaS. Oracle Cloud Database revenue rose 35% during the quarter, while multicloud database revenue grew 531% in USD terms.

AI contracts

Remaining performance obligations were USD $553 billion at quarter-end, up 325% from a year earlier and USD $29 billion higher than the previous quarter.

Oracle attributed most of the increase to "large-scale AI contracts". It said it did not expect to raise incremental funds to support these contracts because equipment was "either funded upfront via customer prepayments" or supplied by customers who buy GPUs and provide them to Oracle.

Oracle also said demand for cloud computing for AI training and inferencing was increasing faster than supply. It added that some of the largest buyers of AI cloud capacity had "strengthened their financial positions quite substantially".

Funding plans

During the quarter, Oracle updated investors on its capital funding plans, including an intention to raise up to USD $50 billion in debt and equity financing. It also said it did not expect to issue additional bonds beyond that amount in calendar year 2026.

Oracle raised USD $30 billion within days through investment-grade bonds and mandatory convertible preferred stock, describing the order book as "substantially oversubscribed". It has not yet started the at-the-market equity portion of the financing programme.

Operating cash flow over the last twelve months was USD $23.5 billion, up 13%.

Product development

Oracle also outlined changes to its internal software development approach, saying AI models for generating computer code had become more efficient and that it had been restructuring product development teams into smaller groups.

In a statement included with the results, Oracle said: "AI models for generating computer code have become so efficient that we have been restructuring our product development teams into smaller, more agile and productive groups. This new AI Code Generation technology is enabling us to build more software in less time with fewer people. Oracle is now building more SaaS applications for more industries at a lower cost. AI code generation is making our SaaS application suites more competitive and more profitable."

Outlook

For the fiscal fourth quarter, Oracle expects total revenue growth of 18% to 20% in constant currency and 19% to 21% in USD. Total cloud revenue is expected to grow 44% to 48% in constant currency and 46% to 50% in USD.

Non-GAAP earnings per share are forecast to grow 15% to 17%. Oracle guided to USD $1.96 to USD $2.00 for non-GAAP earnings per share, and USD $1.92 to USD $1.96 in constant currency.

For fiscal 2026, Oracle reiterated its expectation for revenue of USD $67 billion and capital expenditures of USD $50 billion. It also raised guidance for fiscal 2027 total revenue to USD $90 billion.

The board declared a quarterly cash dividend of USD $0.50 per share on outstanding common stock.