Key Takeaways:
Oracle's $638 billion backlog and 404% multicloud surge contrast with Salesforce, raising questions about which enterprise software giant to buy.
Oracle reported $19.18 billion in quarterly revenue and raised its fiscal 2027 profit forecast, but a $40 billion capital expenditure plan and negative free cash flow sent shares down 8.8% since the June 10 report.
"Interesting panic selling in Oracle even down here. Selloff must stop to sustain any advance. They have made themselves too crucial," Jim Cramer said on CNBC after the results. DA Davidson raised its price target to $225 from $200, maintaining a Buy rating on the stock.
Oracle's adjusted earnings of $2.11 per share beat the Zacks Consensus Estimate by 7.7%, while revenue exceeded expectations by 0.5%. The company's remaining performance obligations hit a record $638 billion, with near-term RPO surging 363% year over year. Multicloud revenues jumped 404%, and bookings rose 325%. GPU utilization reached 97.5%, with 35,000 GPUs from 59 customers up for renewal — 49% of those customers renewed for 92% of those GPUs.
The divergence between Oracle's massive backlog and its capital-intensive buildout strategy creates a defining choice for investors. Oracle trades with a net profit margin of 25.30%, but free cash flow turned negative $23.7 billion as the company poured capital into AI data centers. It raised $43 billion in debt and $5 billion in equity financing, with plans for an additional $20 billion equity offering. BMO Capital's Keith Bachman lifted his price target to $220, expecting earnings to move higher in fiscal 2027 supported by lower operating costs.
The AI Infrastructure Bet
Oracle delivered more than 1.2 gigawatts to customers during fiscal 2026, a figure that shows the scale of its data center buildout. The company reiterated its fiscal 2027 revenue guidance of $90 billion while raising adjusted earnings forecasts to $8.05 per share, an 18% increase from last year. Wall Street had estimated $8.01 per share in earnings and $88.9 billion in revenue. Oracle remains confident in delivering a 31% revenue CAGR and 28% EPS CAGR through fiscal 2030.
The capital raise — $43 billion in debt and $5 billion in equity, plus a planned $20 billion equity offering — funds one of the largest infrastructure buildouts in enterprise technology history. Oracle's cloud infrastructure business now competes directly with Amazon Web Services, Microsoft Azure, and Google Cloud for AI workloads, a market projected to exceed $1 trillion in cumulative spending over the next five years. The company's 97.5% GPU utilization rate suggests demand is outstripping supply, supporting the case for aggressive capacity expansion.
What This Means for Investors
The contrasting strategies of Oracle and Salesforce reflect a broader divide in enterprise software. Oracle is betting heavily on AI infrastructure, accepting near-term margin pressure for long-term cloud dominance. BMO Capital expects Oracle's earnings to move higher in fiscal 2027 as operating costs normalize. The company's net profit margin of 25.30% remains among the strongest in enterprise software, but the negative free cash flow and $40 billion capex plan introduce balance-sheet risk that investors must weigh against the $638 billion backlog opportunity.
Oracle shares trade with an implied upside of more than 6% from current levels based on BMO Capital's $220 target and DA Davidson's $225 target. The company's long-term targets — 31% revenue CAGR and 28% EPS CAGR through fiscal 2030 — suggest management expects the AI infrastructure bet to deliver compounding returns. For investors choosing between Oracle and Salesforce, the question comes down to whether Oracle's massive backlog and AI momentum justify the balance-sheet leverage required to capture it. Oracle's net profit margin of 25.30% provides a cushion, but the negative $23.7 billion in free cash flow means the company is betting its balance sheet on future AI demand materializing as expected.
This article is for informational purposes only and does not constitute investment advice.
