Oracle's cash burn and backlog both beat estimates as customers cover part of the AI bill

Oracle told investors on Thursday that customers prepaid $11.36 billion of its capital spending in the first quarter, a disclosure analysts said was a bullish signal for a company whose ballooning AI spending stoked a year of cash-burn worries.

The revelation yielded a smaller-than-expected cash shortfall and a larger-than-expected order backlog, and it sent Oracle’s beaten-down stock up 4% in after-hours trading.

Free cash flow fell $5.40 billion, well under the $9.56 billion forecast

Oracle reported a negative free cash flow of $5.40 billion for its fiscal first quarter, well short of the $9.56 billion shortfall analysts had penciled in, according to LSEG data.

That burn was more than the previous quarter, but nowhere near the negative free cash flow of $11.48 billion Oracle reported in the third quarter of fiscal 2026.

Revenue rose 30% to $19.3 billion, above estimates of $19.14 billion, and adjusted earnings of $1.92 a share topped expectations of $1.74.

Capital expenditure was $28.50 billion for the quarter, and Oracle said about $11.36 billion of that spending was funded by prepayments from its own customers and not its own cash.

Cloud infrastructure revenue, which Oracle‘s own press release attributed to “triple digit growth” for the quarter, jumped 121% to $7.39 billion.

Remaining obligations hit $664 billion, beating estimates

Oracle booked more than $30 billion of additional AI cloud contracts in the quarter, lifting its remaining performance obligations to $664 billion.

“And the vast majority of those new contracts were via pre-pay or bring-your-own-hardware or similar mechanic, so won’t require incremental capital from Oracle,” said Oracle CFO’s Hilary Maxson in the analyst call.

Oracle began to see a strong conversion from its backlog to revenue this quarter and anticipates about half of its existing backlog will convert to sales in the next 36 months, she said.

“The AI ROI story just got real for Oracle and its customers,” said Rebecca Wettemann, CEO of the research firm Valoir.

She continued, “Strong results mean Oracle’s customers are voting with their wallets, and Oracle needs to continue to ​push the narrative that backlog growth isn’t just an OpenAI story anymore.”

That’s a relief after a turbulent period for Oracle’s stock, which is down more than 21% this year and close to 25% since its June earnings report through Thursday’s close.

S&P Global cut Oracle’s credit rating in July, citing weak cash flow and increasing business risk. The company now carries $125 billion in debt.

Oracle and CoreWeave were singled out by Moody’s that same month as the two companies with the sharpest credit risk among six leading AI infrastructure spenders, with Oracle rated Baa2, with a negative outlook, two notches above junk.

Investors have also been following reports of delays tied to labor, permitting, and power availability at Oracle’s Stargate data center project.

Against that backdrop, Oracle kept its spending target for the year at $90 billion to $95 billion in reported capital expenditure, consistent with guidance provided by chief financial officer Hilary Maxson on the June earnings call.

On a net-cash basis, the plan still calls for about $70 billion to be spent this fiscal year, more than twice the $32 billion in operating cash flow Oracle generated in all of fiscal 2026.

Oracle also edged up its full-year adjusted earnings forecast slightly to $8.10 a share from $8.05, just above the $8.07 analysts had expected, and kept its revenue target at $90 billion or more.

A single five-year, $300 billion contract to supply OpenAI accounts for a large share of the backlog.

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