Oracle Corporation (ORCL) saw its shares climb 6.2% on Thursday, reaching an intraday high of $204.16 before settling back to $202.78, placing the company's market capitalization near $590.7 billion. The rally followed the company's fiscal third-quarter earnings report, which showed a 22% year-over-year revenue increase to $17.2 billion, with cloud revenue surging 44% to $8.9 billion and cloud infrastructure revenue jumping 84% to $4.9 billion.
Despite the strong top-line growth, Oracle faces intense scrutiny over its massive investments in artificial intelligence data centers. The company reported $130.9 billion in senior notes and other long-term debt as of February 28, with $43 billion in new senior notes issued during the first nine months of fiscal 2026. Capital expenditures totaled $39.2 billion in cash during the same period, and Oracle disclosed an additional $261 billion in lease commitments, primarily for data centers, that have not yet been recorded on its balance sheet.
Backlog and Revenue Recognition
Oracle's remaining performance obligations, representing contracted but unbooked revenue, stood at $552.6 billion as of February 28. However, only about 12% of that backlog is expected to be recognized as revenue in the next fiscal year, raising questions about the pace of conversion into profit. The company guided fiscal 2026 revenue at $67 billion, with capital spending targeted at $50 billion, and raised its fiscal 2027 revenue outlook to $90 billion.
For the fiscal fourth quarter, Oracle forecasts overall revenue growth of 19% to 21% in U.S. dollars, with cloud revenue expected to jump 46% to 50%. Executives have indicated that profit margins are likely to improve as customers move beyond renting AI chips to purchasing additional services.
Analyst Reactions
Zacks Investment Research upgraded Oracle to Rank #2 (Buy), citing improved earnings estimate momentum that could drive further stock gains. The upgrade came as investors reassess Oracle's role in AI infrastructure, distinct from its legacy database and software businesses.
Seeking Alpha analyst Louis Gerard moved his rating to Hold from a more negative stance, noting that "the easy short is gone." However, he cautioned that significant questions remain about whether Oracle's backlog will translate into sustainable profits and whether debt concerns have truly abated.
Data Center Expansion and Competition
Oracle is aggressively expanding its data center footprint, including a new campus in Doña Ana County, New Mexico, dubbed Project Jupiter. The company launched a bilingual advertising campaign in the state on Tuesday to promote the project's expected benefits, including job creation, water system improvements, and a fuel-cell power plant. Julia Robin, who leads infrastructure planning and sourcing for Oracle Cloud Infrastructure, said the company wants residents to "get the facts about the project directly from us."
According to a Reuters report from March, Oracle is building data centers for partners such as OpenAI and Meta Platforms, aiming to capture business from larger cloud providers like Amazon Web Services and Microsoft Azure. The company's AI infrastructure push comes as eMarketer analyst Jacob Bourne described Oracle's quarter as "a beat and a stress test result for the AI trade."
Outlook and Risks
Oracle's heavy reliance on debt to fund its data center expansion poses a clear risk. The company's $130.9 billion in long-term debt, combined with substantial lease commitments, could weigh on profitability if AI computing demand softens or if customers delay scaling their usage. Nonetheless, Oracle's guidance for fiscal 2027 revenue of $90 billion suggests management expects continued strong demand for its cloud and AI services.
