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FollowingOracle's quarterly earnings report is impressive: The surge in AI cloud contracts drives RPO to soar to US$664 billion.
On September 10, Oracle's share price rose nearly 8% in after-hours trading. The rise stems from the company's record of more than $30 billion in additional AI cloud contracts in the first quarter of fiscal 2027, raising its remaining performance obligation (RPO) to $664 billion. According to earnings data released by Oracle, the backlog of orders increased by $209 billion compared with the same period last year.
The after-hours share price change occurred after the company's quarterly revenue exceeded expectations and the adjusted earnings per share forecast for fiscal year 2027 was raised. The strong performance of AI cloud contracts has become a key factor driving Oracle's RPO to reach US$664 billion, providing the cloud computing business with a huge reserve of future performance obligations. RPO is the portion of contracted commitments that has not yet been recognized as revenue.
Interpretation of Core Financial Data
Oracle reported that total revenue for the first quarter was US$19.3 billion, a year-on-year increase of 30%. Among them, cloud infrastructure revenue increased significantly by 121% to US$7.4 billion. These results highlight the centrality of artificial intelligence-related cloud demand in Oracle's latest growth data, with significant increases in RPO coinciding with triple-digit growth in cloud infrastructure revenue.
Investors responded positively to contract data and quarterly financial updates. Reuters reported that Oracle's quarterly revenue exceeded market expectations and raised its adjusted earnings per share forecast for fiscal year 2027 from $8.05 to $8.10. Although the updated forecast for earnings per share growth is moderate, the reported RPO expansion highlights the huge volume of cloud demand Oracle is undertaking.
Infrastructure expansion accompanied by negative free cash flow
Converting Oracle's backlog of orders into real revenue requires continued expansion of its cloud infrastructure. During the quarter, the company added 850 megawatts of data center capacity. However, as Oracle continues to invest in cloud infrastructure to serve the expanding AI cloud contract base, the construction has resulted in negative free cash flow of approximately $5 billion, highlighting the capital pressure placed on serving such large-scale demand.
