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Oracle is expected to increase its capital expenditures for fiscal year 2026 by $1.5 billion to support the growth of AI workloads. During Oracle's recent second-quarter fiscal year 2026 earnings call, CFO Doug Kehring stated that the company's spending forecast has been revised upward due to an increase in customer contracts that have not yet been paid (remaining performance obligations, RPO).
In the quarter ending November 30, Oracle's contract backlog increased by $68 billion, reaching a total of $523 billion. This growth was driven by commitments from Meta and Nvidia, serving as a hedge in Oracle's collaboration with OpenAI, which has not yet turned a profit and is expected to pay Oracle up to $300 billion over the next five years.
Meanwhile, Oracle's restructuring costs have significantly increased, reaching $406 million this quarter, a surge of 387% compared to the previous year. This expenditure is mainly related to the company's $1.6 billion restructuring plan, including costs related to layoffs and severance packages. In terms of financial results, Oracle reported revenue of $16.1 billion, a 14% increase, and earnings per share of $2.10, up 91%.
By business segment, Oracle's cloud revenue was $8 billion (up 34%), cloud infrastructure revenue was $4.1 billion (up 68%), cloud application revenue was $3.9 billion (up 11%), Fusion Cloud revenue was $1.1 billion (up 18%), and NetSuite cloud ERP revenue was $1 billion (up 13%).
Although the financial report showed positive growth, investors' reactions were not favorable, leading to a drop of more than 11% in Oracle's stock price during after-hours trading. In November, Oracle's stock experienced significant fluctuations, falling from around $250 to $200, mainly due to market concerns about the company's substantial increase in debt to support AI development. Morgan Stanley even advised investors to short Oracle's stock.
During the earnings call, Kehring tried to reassure investors, stating that the company can access funding through multiple channels, including public bonds, banks, and private debt markets. He also mentioned that Oracle is considering financing options where customers bring their own chips to install in data centers, which could help reduce borrowing.
Key Points:
- 📈 Oracle expects a $1.5 billion increase in capital expenditures for fiscal year 2026 to support AI business growth.
- 💰 Contract backlog increased by $68 billion, reaching a total of $523 billion, with customer commitments providing security for future development.
- 📉 Investor concerns about the company's increased debt led to a drop of over 11% in the stock price during after-hours trading.