Oracle Cloud Leaps 121%, RPO Hits $664B, FY27 Guide at $90B

Oracle closed the first quarter of fiscal year 2027 with revenue of $19.3 billion, a 30% increase year-over-year and approximately $200 million above consensus from LSEG, while expanding its contract backlog to $664 billion, one of the largest backlogs ever recorded by any technology company. This combination allowed the company to raise its annual guidance: total revenue is expected to reach at least $90 billion in fiscal year 2027, equivalent to a 34% expansion in constant currency, with adjusted earnings per share projected at $8.10.

The driving force was Oracle Cloud Infrastructure. OCI grew 121% in the quarter, reaching $7.4 billion, with total cloud (applications and infrastructure) increasing 62% to $11.6 billion. Oracle reported delivering 850 megawatts of AI capacity during the period, featuring over 300,000 active Nvidia GPUs with a utilization rate of 97.9%. Co-CEOs Clay Magouyrk and Mike Sicilia, who took over in September 2025 following Safra Catz's promotion to Executive Vice President of the board, announced over $30 billion in new cloud contracts for AI signed just in the quarter.

The Price of the Race

The release does not hide the cost. Capex reached $28.5 billion for the quarter and free cash flow fell into negative territory at $5.4 billion. This marks the second time in four quarters that Oracle has burned cash to finance data center expansion. Analysts following the Stargate project, a joint initiative with OpenAI worth $300 billion in purchase commitments over five years, point out that payment timelines are misaligned with the immediate investment in silicon and real estate. CFO Hilary Maxson stated on the call that the company will maintain capex above depreciation for several quarters.

The counter-argument comes from the queue of contracts itself. The RPO of $664 billion grew by $26 billion in three months and includes commitments from OpenAI, xAI, Meta, Nvidia, and AMD, along with a contract worth up to $7 billion over ten years with the Pentagon announced during the quarter. It is mainly dollar-denominated demand concentrated among hyperscaler clients, but revenue only converts as power comes online at the campuses in Abilene, Texas, and the newly contracted sites in the UK and Germany.

How Expansion Lands Outside the U.S.

In the United States, Oracle effectively becomes a second option for those wanting to train models and who can no longer fit into AWS. In the UK, the data centers planned under the Stargate UK agreement announced in July are beginning to drive demand for systems engineers and integrators; Capgemini and Accenture have already stated during earnings season that OCI is the fastest-growing platform in their European cloud practices. In India, where Oracle employs about 40,000 staff in development and delivery, OCI growth is pushing hiring in Hyderabad and Bangalore, coinciding with job reductions at TCS and Infosys in traditional BPO.

The point analysts overlook is the gap between the backlog and the recognized revenue. Safra Catz projected in September 2025 that RPO would cross half a trillion dollars within a few months; it crossed $638 billion in Q4 and now $664 billion in Q1. However, conversion requires energy and chips that Nvidia is still unable to deliver at a compatible pace. Should any Stargate contract delay deployment phases, the impact on the P&L for 2028 could be greater than the market currently projects. Oracle has the orders; it just needs to plug them in.

The company has also begun diversifying its client base outside the American hub. Contracts with NTT in Japan and MTN in South Africa, mentioned in the earnings presentation, indicate a second phase where OCI competes not with AWS and Azure, but with Alibaba Cloud and Huawei Cloud in markets that have avoided the Western hyperscaler. This is one of the few instances where a traditional database company becomes critical infrastructure for governments seeking cloud sovereignty, a front that AWS has yet to address.