Oracle reported fiscal second‑quarter 2026 revenue of $16.06 billion, a 14% year‑over‑year increase, but fell short of the consensus estimate of $16.21 billion. Adjusted earnings per share reached $2.26, beating the $1.64 consensus by $0.62, a 38% upside that was largely driven by a $2.7 billion pre‑tax gain from the sale of its stake in chip designer Ampere.
The quarter’s revenue mix shifted sharply away from legacy software. Software license revenue declined 21% to $5.88 billion, while total software revenue fell 3% to $5.88 billion, underscoring the erosion of high‑margin license sales. In contrast, cloud infrastructure revenue surged 68% to $4.10 billion, and cloud applications grew 11% to $3.90 billion, reflecting strong demand for Oracle’s AI‑enabled data‑center services and the company’s “chip‑neutral” strategy that allows it to deploy GPUs from multiple vendors.
Margin dynamics were mixed. The EPS beat was offset by the revenue miss, but the one‑time Ampere gain and disciplined cost management helped maintain operating profitability. The shift to lower‑margin cloud services compressed overall margins, but the higher‑margin cloud infrastructure and applications revenue helped mitigate the impact of declining legacy software income.
Oracle raised its fiscal 2026 capital‑expenditure guidance by $15 billion to $50 billion, citing the need to accelerate AI data‑center buildout. Management highlighted the importance of maintaining a flexible, chip‑neutral architecture and noted that the sale of Ampere was a strategic move to focus resources on cloud growth. The guidance increase signals confidence in sustained demand for AI infrastructure, but also raises concerns about the company’s debt‑heavy balance sheet.
Investors reacted strongly to the revenue miss and the CapEx hike. The market focused on the potential strain on cash flow and the sustainability of the AI‑infrastructure strategy, while the EPS beat and robust cloud growth tempered some of the negative sentiment. Analysts noted that the revenue miss reflects a broader shift in the software industry, but the company’s cloud momentum and RPO backlog of $523 billion suggest long‑term upside.
Oracle’s outlook remains bullish on cloud and AI, with a $523 billion remaining performance obligations backlog and a growing pipeline of high‑margin AI services. Management emphasized continued cost discipline and strategic investments in GPU‑enabled workloads. However, the increased CapEx, rising debt, and margin compression from legacy software decline present short‑term headwinds that will require careful execution to preserve profitability.
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