Oracle Corporation (ORCL.US) Conference Call: RPO Surges 363% to a Record High, Capital Expenditure Guidance Exceeds Expectations.

On June 10th, after the US stock market closed, Oracle Corporation (ORCL.US) released its fourth quarter and full-year fiscal report for 2026. Driven by the extremely strong demand for AI computing power and the cloud database strategy, the company's order backlog, revenue growth, and future capital expenditure plans have all reached astonishing levels. At the end of the fourth quarter, Oracle Corporation's Remaining Performance Obligations (RPO) reached a record $638 billion, with a quarterly net increase of $85 billion, a staggering 363% year-on-year increase. This provides the company with high certainty for revenue growth in the coming years. As a result, the company's management has provided a high guidance of 34% revenue growth for the 2027 fiscal year. Based on an estimated revenue of over $67 billion for the 2026 fiscal year, achieving a 34% growth would bring the 2027 fiscal year revenue close to the $90 billion level. However, concerns about data center costs have intensified, with Oracle Corporation expecting capital expenditures of around $70 billion for the 2027 fiscal year, doubling from the previous year's plan. However, the management emphasized that no additional debt will be incurred during the 2026 calendar year. New CFO Hilary Maxson is trying to alleviate market concerns. She stated that after infrastructure projects reach a stable state, the return on investment at the project level can reach the high 20% range. The management also reiterated that the infrastructure business can achieve a long-term profit margin of 30% to 40%. The AI frenzy materializes: RPO explodes by 363%, trillion-dollar market opens The most shocking indicator in this financial report is the Remaining Performance Obligations (RPO). By the end of the fourth quarter, Oracle Corporation's RPO reached a record $638 billion, with a quarterly net increase of $85 billion, a staggering 363% year-on-year increase. This provides the company with high certainty for revenue growth in the coming years. Where does this astronomical order increase come from? Oracle Corporation's CEO Clay Magouyrk provided an answer during the conference call: "This quarter, we signed $670 billion in AI infrastructure contracts, most of which were 'Bring Your Own Hardware (BYOH)' or 'prepaid' modes. The accumulated amount of these two types of contracts has reached $750 billion." Facing the surging demand for computing power, Clay expressed his excitement, stating: "The AI infrastructure makes the existing cloud infrastructure market pale in comparison. Everything we see indicates that this market's size reaches tens of trillions of dollars annually." He even dispelled market concerns about "AI computing power surplus" with a set of data: "Our global GPU utilization rate is as high as 97.5%. In the fourth quarter, 35,000 GPUs from 59 different customers faced renewals, with 49% of customers renewing 92% of GPUs. But that does not mean that the remaining 8% of GPUs are idle. Most of the GPUs returned in the same quarter were immediately sold to other customers." The "happy trouble": $700 billion in capital expenditures and a $400 billion financing plan for the new fiscal year The surge in orders requires Oracle Corporation to undergo high-intensity capital expansion. The Chief Financial Officer Hilary Maxson stated that the expected net cash outflow for capital expenditures in the 2027 fiscal year is about $70 billion. To support this massive capital expenditure plan, the company expects to raise approximately $400 billion through debt and equity financing in the 2027 fiscal year, including the previously announced $200 billion equity issuance plan. Hilary clearly stated that they do not plan to increase additional debt financing in the 2026 calendar year to protect the company's investment-grade credit rating. This massive investment plan post-market has raised short-term market concerns. However, from the management's perspective, this is the cost necessary to lock in future revenue. When asked about the high capital expenditure, Clay candidly expressed: "My job is to find ways to spend money faster so that sometimes I can get increased revenue." He explained that due to rising supply chain and component prices (such as memory, SSD, etc.), Oracle Corporation signs fixed-price contracts with customers when costs are determined; and when costs are uncertain, they use a floating mechanism to ensure that "Oracle Corporation does not face profit margin declines." To dispel investor concerns about the capital-intensive model lowering profits, CFO Hilary provided an economic account: "We believe that the return on investment in the infrastructure business (CPU and GPU business) is very strong. Roughly calculated, when the revenue from large projects reaches a stable state, the return on investment can exceed 20%. In 'BYOH' and other modes, this return on investment will be even higher." AI fully implemented: From "paying for results" to the explosion of multi-cloud databases In this financial report, the most shocking indicator is the Remaining Performance Obligations (RPO). By the end of the fourth quarter, Oracle Corporation's RPO reached a record $638 billion, with a quarterly net increase of $85 billion, a staggering 363% year-on-year increase. This provides the company with high certainty for revenue growth in the coming years. Where does this astronomical order increase come from? Oracle Corporation's CEO Clay Magouyrk provided an answer during the conference call: "This quarter, we signed $670 billion in AI infrastructure contracts, most of which were 'Bring Your Own Hardware (BYOH)' or 'prepaid' modes. The accumulated amount of these two types of contracts has reached $750 billion." Facing the surging demand for computing power, Clay expressed his excitement, stating: "The AI infrastructure makes the existing cloud infrastructure market pale in comparison. Everything we see indicates that this market's size reaches tens of trillions of dollars." He even dispelled market concerns about the "AI computing power surplus" with a set of data: "Our global GPU utilization rate is as high as 97.5%. In the fourth quarter, 35,000 GPUs from 59 different customers faced renewals, with 49% of customers renewing 92% of GPUs. But that does not mean that the remaining 8% of GPUs are idle. Most of the GPUs returned in the same quarter were immediately sold to other customers." "The happy trouble": $700 billion in capital expenditures and a $400 billion financing plan The surge in orders requires Oracle Corporation to undergo high-intensity capital expansion. The company's Chief Financial Officer, Hilary Maxson, stated that the expected net cash outflow for capital expenditures in the 2027 fiscal year is about $70 billion. To support this massive capital expenditure plan, the company expects to raise approximately $400 billion through debt and equity financing in the 2027 fiscal year, including the previously announced $200 billion equity issuance plan. Hilary clearly stated that they do not plan to increase additional debt financing in the 2026 calendar year to protect the company's investment-grade credit rating. This massive investment plan post-market has raised short-term market concerns. However, from the management's perspective, this is the cost necessary to lock in future revenue. When asked about the high capital expenditure, Clay candidly expressed: "My job is to find ways to spend money faster so that sometimes I can get increased revenue." He explained that due to rising supply chain and component prices (such as memory, SSD, etc.), Oracle Corporation signs fixed-price contracts with customers when costs are determined; and when costs are uncertain, they use a floating mechanism to ensure that "Oracle Corporation does not face profit margin declines." To dispel investor concerns about the capital-intensive model lowering profits, CFO Hilary provided an economic account: "We believe that the return on investment in the infrastructure business (CPU and GPU business) is very strong. Roughly calculated, when the revenue from large projects reaches a stable state, the return on investment can exceed 20%. In 'BYOH' and other modes, this return on investment will be even higher." AI fully implemented: From "paying for results" to the explosion of multi-cloud databases In this financial report, the most shocking indicator is the Remaining Performance Obligations (RPO). By the end of the fourth quarter, Oracle Corporation's RPO reached a record $638 billion, with a quarterly net increase of $85 billion, a staggering 363% year-on-year increase. This provides the company with high certainty for revenue growth in the coming years. Where does this astronomical order increase come from? Oracle Corporation's CEO Clay Magouyrk provided an answer during the conference call: "This quarter, we signed $670 billion in AI infrastructure contracts, most of which were 'Bring Your Own Hardware (BYOH)' or 'prepaid' modes. The accumulated amount of these two types of contracts has reached $750 billion." Facing the surging demand for computing power, Clay expressed his excitement, stating: "The AI infrastructure makes the existing cloud infrastructure market pale in comparison. Everything we see indicates that this market's size reaches tens of trillions of dollars." He even dispelled market concerns about the "AI computing power surplus" with a set of data: "Our global GPU utilization rate is as high as 97.5%. In the fourth quarter, 35,000 GPUs from 59 different customers faced renewals, with 49% of customers renewing 92% of GPUs. But that does not mean that the remaining 8% of GPUs are idle. Most of the GPUs returned in the same quarter were immediately sold to other customers."