Despite delivering a record-breaking quarterly earnings report, shares of Oracle (NYSE: ORCL) continued to decline in pre-market trading on Friday, extending a recent downward trend.
The company's financial results for the fourth quarter of fiscal 2026 revealed revenue of $19.2 billion, marking a 21% year-over-year increase and surpassing market expectations of $19.09 billion. Adjusted earnings per share came in at $2.11, also exceeding analyst estimates of $1.97. The cloud infrastructure segment was a primary growth driver, with its revenue surging 93% year-over-year to $5.8 billion.
More notably, the company's remaining performance obligations reached a record $638 billion, with a net increase of $85 billion in the quarter alone. This substantial backlog primarily consists of large-scale, long-term contracts signed by customers to secure AI computing resources, highlighting significant market demand for AI cloud services.
However, this strong performance failed to alleviate investor concerns. Reports indicate the core reason for the market sell-off is Oracle's aggressive capital expenditure plans. The company's total capital expenditures for fiscal 2026 reached $55.7 billion, resulting in negative free cash flow of $23.7 billion. Looking ahead to the new fiscal year, the company anticipates capital expenditures will further climb to $70 billion.
To support this expansion, Oracle announced plans to raise approximately $40 billion in funding during fiscal 2027, which includes a previously announced $20 billion equity offering. This financing scale far exceeded market expectations, sparking worries about shareholder dilution and cash flow pressure. Several institutions downgraded their ratings on Oracle stock following the earnings release.
Furthermore, the company's Chief Financial Officer stated during the earnings call that gross margins are expected to decline in the new fiscal year as data center construction accelerates. This comment further intensified market concerns about future profitability. Although Oracle reaffirmed its full-year revenue target of $90 billion, investors remain cautious about the long-term returns under its capital-intensive expansion model.
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