Summary
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Total revenues increased 17% to $67.4B, driven by cloud revenue growth of 39%, while free cash flow turned deeply negative at -$23.7B due to a $55.7B capital expenditure surge for data center expansion.
Revenue growth accelerated to 17% from 8% in the prior year, but massive infrastructure investments caused free cash flow to swing from -$394M to -$23.7B.
- Net income rose 37% to $17.1B, aided by a $2.7B gain on the sale of the Ampere investment.
- Diluted EPS increased 34% to $5.83, reflecting higher net income and a modest increase in share count.
- Remaining performance obligations reached $638B, up from $138B, driven by significant new cloud contracts.
Results That Matter
| Metric | Current Period | Prior Period | Change | Investor Takeaway |
|---|---|---|---|---|
Revenue | $67.4B | $57.4B | +17.4% | Growth was primarily due to a $9.3B increase in cloud and software revenues, driven by cloud services as customers purchased applications and infrastructure technologies and renewed contracts. |
Operating income | $20.6B | $17.7B | +16.4% | Operating income increased due to higher revenues, partially offset by a $6.0B increase in cloud and software expenses, mainly from higher infrastructure costs. |
Operating margin | 30.6% | 30.8% | −0.2 ppts | Margin was flat as revenue growth was offset by higher infrastructure expenses to support cloud expansion. |
Diluted EPS | $5.8 | $4.3 | +34.3% | EPS growth outpaced net income growth due to a lower effective tax rate and a $2.7B gain on the Ampere sale, partially offset by higher interest expense and preferred dividends. |
Earnings Quality & Cash Conversion
Reported net income of $17.1B included a $2.7B gain on the sale of the Ampere investment, $1.8B in restructuring charges, and $1.7B in amortization of intangibles. Excluding these and other items, non-GAAP net income adjustments totaled $5.3B. Operating cash flow of $32.0B significantly exceeded net income, but free cash flow was -$23.7B after $55.7B in capex.
Operating cash flow was 1.9x net income (cash conversion); free cash flow of $-23.7B.
Value Drivers & Capital Allocation
Capital returned — dividends paid $5.8B (prior $4.7B), share repurchases $95.0M (prior $600.0M); capital expenditures $55.7B (prior $21.2B).
Capital allocation was dominated by a massive $55.7B in capital expenditures for data center expansion, funded by $42.7B in new debt and $5.0B in preferred stock issuance. Shareholder returns were modest, with $5.8B in dividends and only $95M in buybacks. The company suspended meaningful buybacks to preserve cash for infrastructure investments.
Return on equity was 40.2% (prior 60.8%); return on assets 6.5% (prior 7.4%).
- Issued $43.0B in senior notes and $5.0B in mandatory convertible preferred stock to fund capital expenditures.
- Entered into a $20B at-the-market equity offering program, with no shares sold as of May 31, 2026.
Forward Signals
cautiousManagement did not provide specific quantitative guidance but expects the upward trend in capital expenditures to continue during fiscal 2027 and in the following fiscal years to meet cloud demand.
Known trends
- Management expects cloud and software expenses to continue growing as they increase data center capacity and establish new geographic locations.
Subsequent events
- In June 2026, the Board declared a quarterly cash dividend of $1,625 per share of Mandatory Convertible Preferred Stock and $0.50 per share of common stock.
Risks
No risk factors found
The AI couldn't extract this section from the filing. The company probably didn't report it in a standard format.
Segments
| Segment | Revenue | Operating Income | Change | Commentary |
|---|---|---|---|---|
| Cloud and Software | $58.5B | $34.5B | +18.9% | 87% of segment revenue, 59% operating margin — Cloud revenue growth was driven by cloud infrastructure (84% of cloud growth) and cloud applications (16%), with total cloud revenues reaching $34.0B, up 39%. |
| Services | $5.7B | $1.5B | +9.7% | 9% of segment revenue, 27% operating margin — Revenue increase was primarily due to higher consulting services revenues, with margin improvement from lower employee-related and bad debt expenses. |
| Hardware | $3.1B | $2.0B | +5.0% | 5% of segment revenue, 65% operating margin — Revenue growth was led by Oracle Exadata and other strategic hardware products, with margin expansion from higher revenues and lower sales and marketing costs. |
Balance Sheet & Liquidity
Leverage: Total debt (current and non-current notes payable) was $129.5B, against cash and marketable securities of $31.9B, resulting in a net debt position of $97.6B. Shareholders' equity was $43.1B.
Liquidity: Cash and equivalents were $31.3B, with an additional $10.0B undrawn revolving credit facility. Operating cash flow of $32.0B provides substantial liquidity, but free cash flow was negative due to high capex.
Cash flow: Cash flow — operating $32.0B, investing $-51.9B, financing $40.3B.
Working capital: Current assets $46.6B vs. current liabilities $41.8B (current ratio 1.12x). A year earlier: $24.6B vs. $32.6B (0.75x).
Maturities & covenants
- In March 2026, entered into a new $10.0B five-year revolving credit agreement, with no outstanding borrowings as of May 31, 2026.
- Issued $43.0B in senior notes with maturities ranging from 2029 to 2066.
Notable Footnotes
| Item | Impact |
|---|---|
| Remaining Performance Obligations | RPOs surged to $638B from $138B, primarily due to significant cloud contracts, indicating strong future revenue visibility but also requiring substantial infrastructure investment. |
| Ampere Computing Sale | Sale of Ampere investment generated a $2.7B gain and $4.3B in cash proceeds, significantly boosting non-operating income. |
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