Oracle projected on Tuesday that the artificial intelligence data center boom will drive its revenue far beyond Wall Street estimates through fiscal year 2027. This outlook propelled its shares to rise 8.3% in after-hours trading.
The strong forecast helped ease investor concerns that Oracle's heavy spending to enter the AI computing market might not generate profits quickly enough. The company has undertaken a significant strategic shift, focusing on building data centers for partners like OpenAI and Meta, while also reducing its workforce. It is leveraging smaller engineering teams and AI coding tools to roll out new software for its long-standing enterprise customer base.
A key indicator of future contract revenue, Oracle's remaining performance obligations (RPO), surged 325% year-over-year in the third quarter to $553 billion. This figure surpassed the $540.37 billion forecast by four Visible Alpha analysts. In the previous quarter, Oracle had reported RPO of $523 billion.
The majority of the RPO growth in the third quarter was linked to large-scale AI contracts. Despite carrying significant debt, the company stated it "does not anticipate needing to raise any incremental capital."
Oracle also raised its revenue forecast for fiscal 2027 to $90 billion, exceeding the analyst consensus estimate of $86.6 billion.
"Oracle's quarter serves as both a highlight and a stress test for the AI industry," an analyst commented. "As a major player in AI infrastructure with substantial debt exposure, Oracle acts like a canary in the coal mine. This report suggests the underlying health of AI spending may exceed the hype."
For the third quarter ended February 28, the company reported total revenue of $17.19 billion, beating the average analyst estimate of $16.91 billion.
Oracle expects adjusted earnings per share for the current fourth quarter to be between $1.96 and $2.00, higher than the analyst forecast of $1.94 per share.
The company anticipates fourth-quarter revenue, measured in U.S. dollars, to grow between 19% and 21%, aligning with analyst expectations of 20.2% growth to $19.12 billion. Similarly, Oracle projected cloud revenue growth of 46% to 50% in dollar terms, consistent with the forecast for 48% growth to $9.98 billion.
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