Oracle is spending more on building data centres than it earns in a quarter

Oracle told investors this week that it is sitting on $664bn of work it has agreed to do and has not yet done.

Accountants call this remaining performance obligations, which is a dense way of saying that customers have signed contracts, the money is promised, and Oracle now has to go and build the thing they are paying for.

A year ago the same figure stood at $455bn, so in twelve months the pile of promises has grown by $209bn. The figures come from Oracle’s own results presentation for the first quarter of its 2027 financial year, reported by Investing.com.

Revenue for the three months came in at $19.3bn, up 30 percent, and profit per share beat what analysts had been expecting.

Turning a promise into a working data centre means buying land, steel, chips and an enormous amount of electricity, and Oracle is buying all of it faster than the cash is arriving.

It spent $28bn on construction and equipment in a single quarter. That is why a three-month period in which the business threw off a record $23bn in cash still ended $5bn short once the building work was paid for.

It is laying out more than it takes in, deliberately, because the contracts it has already signed require the capacity to exist.

The part of Oracle doing the growing is its cloud infrastructure business, essentially renting out computing power by the hour. It brought in $7.4bn in the quarter, more than double the same period last year, and the machines are close to full: Oracle says its AI infrastructure is running at 97.9 percent utilisation.

It added 850 megawatts of capacity and more than 300,000 graphics chips in three months. Customers whose chips are up for renewal are paying around 20 percent more to keep them, which is Oracle’s answer to anyone wondering what happens to the hardware when the first contracts run out.

The $664bn headline is the one that travels, but what matters is not only how big the pile is. It is how quickly it is still growing, and there the picture has changed.

Over the past three months, the backlog grew by $26bn. In the equivalent quarter a year ago, it grew by $138bn, when Oracle signed deals with OpenAI, xAI, Meta, Nvidia and AMD in quick succession. The total is still remarkable, and the rate at which new business is landing is a long way off last year’s.

Paying for what has been promised is the other half of this. Oracle expects to spend between $90bn and $95bn on capital projects over the full year, against revenue it expects to be at least $90bn, which means the building budget is now roughly the size of the entire company’s annual sales.

To help cover it, Oracle sold $20bn of new shares into the open market during the quarter, raising money without taking on more debt, though at the cost of diluting the people who already own the stock.

Oracle spent $55.7bn on data centres over the previous twelve months, needed the bond investor PIMCO to anchor $10bn of a $16.3bn financing after American banks stepped back, and cut its workforce by about 13 percent while all this was going on.

Hilary Maxson, who became finance chief in April, has the job of holding the balance sheet together. Clay Magouyrk and Mike Sicilia have run the company as joint chief executives since last September, with Safra Catz moving up to executive vice chair.

Hanging over the whole thing is how much of that $664bn depends on one customer. OpenAI is reported to have committed around $300bn to Oracle, and OpenAI is itself carrying roughly $100bn of infrastructure obligations and has already paused one of its Stargate sites.

Shareholders have taken Oracle to court over it, arguing the company was not straight about how conditional that arrangement really is, and the gap between analysts and the share price has been unusually wide for months.

The market could not make up its mind. Oracle shares fell more than 5 percent during the day and then climbed over 4 percent in after-hours trading once the numbers landed.

The company has set aside 28 October, at the end of its AI World conference in Las Vegas, to walk investors through its longer-term plans. That is the first real opportunity to ask where the next $90bn is coming from.