Oracle spent $55.7 billion on data centres in a single year, beat its own guidance by $5.7 billion, and wants to raise another $40 billion

Oracle reported fiscal fourth-quarter revenue of $19.2 billion, up 21% year on year, and adjusted earnings of $2.11 per share, beating analyst estimates of $19.1 billion and $1.97 respectively. The numbers were overshadowed by capital expenditure that came in well above the company’s own projections.

The company spent approximately $55.7 billion on capital expenditure in the fiscal year ended May 31, exceeding its previous guidance of $50 billion. Oracle now expects to spend roughly $70 billion in net capital expenditure in fiscal 2027, with the reported figure $20 billion to $25 billion higher due to prepayments for components, CFO Hilary Maxson said on the earnings call.

The cloud numbers

Cloud infrastructure revenue, the business most directly tied to AI workloads, grew 93% to $5.8 billion in the quarter. Total cloud revenue including software applications reached $9.9 billion, up 47%. For the full fiscal year, cloud infrastructure revenue hit $18.1 billion, up 77%.

Oracle guided for total cloud revenue to jump approximately 61% in the current quarter ending in August, just shy of the 62% analysts had pencilled in.

The $638 billion backlog

Remaining performance obligations, Oracle’s measure of contracted future revenue, reached $638 billion at the end of the quarter, up from $553 billion three months earlier and well above the $589.5 billion analysts expected. The company said most of the new bookings were for large-scale AI contracts in which customers prepaid for expensive GPU servers.

“This substantially reduces the amount of capital Oracle must raise to build out our AI data centres,” the company said. Four customers each contracted for more than $8 billion during the quarter. The prepaid and customer-supplied hardware portions of large AI contracts now total $75 billion.

The debt question

Oracle raised $43 billion in debt financing and $5 billion in equity during the fiscal year just ended. It plans to raise another $40 billion in equity and debt in fiscal 2027, including $20 billion through a previously announced programme to sell shares at market prices.

The company has approximately $117 billion of debt in the Bloomberg US high-grade corporate bond index, making it the largest issuer outside the financial sector. The tech industry’s broader debt-fuelled AI spending binge has drawn fresh scrutiny from investors questioning whether the returns will justify the cost.

OpenAI and the Abilene campus

Oracle’s large data centres for OpenAI are seeing “significant progress,” co-chief executive Clay Magouyrk said. The company has delivered 42% of capacity at its flagship Stargate site in Abilene, Texas, with an additional 35% to be delivered over the next three months.

The Abilene campus is part of the broader Stargate project with OpenAI and SoftBank, which now spans multiple sites across Texas, Wisconsin, Michigan, and New Mexico with nearly seven gigawatts of planned capacity and over $400 billion in projected investment.

The 30,000 job cuts

Beginning in March, Oracle cut up to 30,000 employees, approximately 18% of its global workforce, in the largest restructuring in the company’s history. The company reported $1.8 billion in restructuring charges for the fiscal year, nearly five times the prior year’s figure.

TD Cowen estimates the layoffs will free up $8 billion to $10 billion in annual cash flow, which Oracle is channelling directly into AI data centre construction. The hardest-hit division was Oracle Health, built on the $28.3 billion Cerner acquisition, where an estimated 8,000 to 10,000 employees were let go.

The flags

Oracle’s shares dropped approximately 7% in extended trading after the results, despite the revenue and earnings beat. The stock had climbed 35% over the prior three months, suggesting investor expectations were already elevated.

The $638 billion backlog is a contracted figure, not recognised revenue. Only 12% is expected to convert within 12 months and 34% within three years, meaning most of that revenue is years away. Whether AI demand sustains at levels that justify $70 billion in annual capital spending remains an open question, particularly as Oracle takes on more debt in a sector already facing doubts about the profitability of infrastructure investment at this scale.