Oracle: the cloud is taking off. And the share price is soaring on Wall Street

Oracle’s cloud business is performing strongly, with first-quarter financial results exceeding expectations, thereby easing investors’ concerns about the company’s artificial intelligence spending plan. And, naturally, this enthusiasm is immediately reflected in the market, with the share price rising by as much as 7 per cent in pre-market trading.

More specifically, during the quarter, Oracle secured over $30 billion in new AI-related cloud contracts, bringing the total to $664 billion. Three months earlier, the figure stood at $638 billion. According to data from Visible Alpha, analysts had estimated $639.89 billion.

Revenue rose by 30 per cent to $19.3 billion, compared with the $19.14 billion forecast by the LSEG consensus. The cloud infrastructure division, which rents out computing capacity to businesses, rose by 121 per cent to $7.4 billion, exceeding the $7.19 billion forecast by analysts surveyed by Bloomberg. For the full financial year 2027, the company has revised its forecast for adjusted earnings per share upwards, from $8.05 to $8.10, and is forecasting revenue of at least $90 billion. Estimates for the second quarter, with revenue growth of between 30% and 34%, are in line with market expectations.

There remains the issue of expenditure. And this is no minor detail. Because investment for the quarter reached $28.5 billion, of which around $18 billion was net cash outflow, whilst analysts had forecast $19.38 billion. Chief Financial Officer Hilary Maxson explained to journalists that the majority of new contracts involve advance payments from customers or arrangements where the customer provides the hardware, and therefore do not require additional capital. Maxson added that, during the quarter, the contract portfolio began to translate into revenue to a significant extent. Between June and August, Oracle brought 850 megawatts of new capacity online in its data centres.

In recent months, the share price has been hit by precisely these concerns. Since the start of the year, it has fallen by over 21 per cent, whilst the S&P 500 has risen by almost 11 per cent. In July, S&P Global downgraded the group’s rating due to weak cash flows and increased operational risk. Furthermore, reports have circulated regarding delays on the Stargate project’s construction sites, linked to labour availability, planning permission and access to energy.