Oracle reported its fiscal 2026 fourth-quarter results for the period ended May 31. Although most core financial metrics exceeded market expectations, the company’s shares fell more than 10% in after-hours trading. The selloff was not triggered by slowing business growth, but rather by another set of capital expenditure figures that far exceeded expectations, along with a new round of large-scale financing plans.

The earnings report showed fourth-quarter revenue of US$19.18 billion, up 21% year-on-year and above analysts’ expectations of US$19.1 billion. Net income reached US$4.22 billion, or US$1.45 per share, compared with US$3.43 billion a year earlier. Adjusted earnings per share came in at US$2.11, exceeding the market consensus estimate of US$1.96.

For the full fiscal year 2026, Oracle’s revenue surpassed US$67 billion for the first time. Non-GAAP operating profit reached US$29 billion, up 16% year-on-year, while non-GAAP earnings per share rose 27% to US$7.63. Excluding certain gains, non-GAAP EPS stood at US$6.83. Operating cash flow reached US$32 billion, representing growth of 54%.

What excited management even more was the company’s Remaining Performance Obligations (RPO), a key indicator of future contracted revenue. At quarter-end, RPO surged to US$638 billion, up 363% year-on-year and well above analysts’ average estimate of US$595.67 billion. The company stated that the majority of newly signed contracts were related to large-scale AI infrastructure projects.

During fiscal 2026, Oracle’s capital expenditures reached US$55.66 billion, up 162% year-on-year and significantly above the company’s previous guidance of US$50 billion. Capital expenditures in the fourth quarter alone totaled approximately US$16.5 billion.

What concerned investors even more was the company’s free cash flow position. For the full year, Oracle reported negative free cash flow of US$23.7 billion. At the same time, depreciation expenses nearly doubled to US$7.62 billion.

To support this unprecedented investment program, Oracle disclosed an extensive financing strategy. During fiscal 2026, the company raised US$43 billion through debt financing and US$5 billion through equity financing. For fiscal 2027, Oracle expects to raise an additional US$40 billion through a combination of debt and equity financing.

Just three months ago, Oracle shares had been benefiting from growing investor optimism surrounding AI. Over the past three months, the stock had gained approximately 35%, largely driven by improving sentiment toward computing service providers and Oracle’s most important customer, OpenAI.

However, this earnings report revealed a harsh reality: even with a major customer such as OpenAI, the capital intensity required to build AI infrastructure remains far greater than many investors had anticipated.

Market Analysis:

Oracle previously announced a partnership with OpenAI to build large-scale data centers. The latest earnings report revealed that 42% of the capacity at the flagship Abilene, Texas campus has already been delivered, with an additional 35% expected to come online over the next three months.

The challenge, however, is that the return-on-investment timeline for projects of this scale appears increasingly mismatched with the current pace of spending. Investors are now questioning whether the long-term returns from AI infrastructure will arrive quickly enough to justify the massive capital outlays being made today.