EARNINGS REVIEW
Oracle, FY26 Q2 Earnings Results
Historical quarterly report · Results and outlook reflect information available at the time of that release. Actual results from subsequent quarters are not incorporated into the outlook.
Strong IaaS growth and expanding contract balances continued, but net income included an Ampere disposal gain, and capital expenditure caused substantial cash outflows.
Assessment · The long-term demand trend is strong, but earnings quality and funding requirements must be assessed together. Do not treat the Ampere disposal gain as recurring profit; assess growth durability through contract conversion into revenue and cash recovery from new facilities.
Key management and company statements
Earnings release · Short original excerpt“Our GAAP and non-GAAP earnings per share were both positively impacted by a $2.7 billion pre-tax gain”Meaning · Both GAAP and non-GAAP earnings per share benefited from a pretax gain of 2.7 B$.
Context · The gain subsequently described is the gain on the sale of the Ampere stake. Its inclusion in non-GAAP figures is significant.
Original statement ↗01 Revenue, operating income and results versus expectations
Year over year · Revenue 14.059 → 16.058 B$ (+14.2% · +1.999 B$), Operating income 4.220 → 4.731 B$ (+12.1% · +0.511 B$).
Quarter over quarter · Revenue 14.926 → 16.058 B$ (+7.6% · +1.132 B$), Operating income 4.277 → 4.731 B$ (+10.6% · +0.454 B$), Operating margin 28.7% → 29.5% (+0.8%p).
IaaS revenue grew 68% to approximately 4.1 B$. Total cloud revenue rose 34%, but software revenue declined 3%, showing that infrastructure is becoming the center of growth.
02 Earnings sustainability · From operating income to net income
Net income of 6.135 B$ included a pretax gain of approximately 2.700 B$ from selling the Ampere stake. The company explicitly stated that this gain contributed to both GAAP and non-GAAP EPS.
GAAP and non-GAAP operating margins differ in whether they exclude stock-based compensation, intangible asset amortization, restructuring and other items. The text uses GAAP.
- Operating income
- 4.731 B$
- Net non-operating income/loss
- 1.611 B$
- Income tax expense
- −0.207 B$
- Consolidated net income
- 6.135 B$
Net income of 6.135 B$ in the existing quarterly data is on a consolidated basis.
03 Cash flow quality · Net income → OCF → FCF
Cash CapEx of 12.033 B$ exceeded OCF of 2.066 B$, resulting in quarterly FCF of −9.967 B$. Asset sale proceeds are not operating cash flow, so the disposal gain is not used to explain FCF.
FY2026 Q1 cumulative amounts were subtracted from disclosed six-month cumulative OCF and CapEx. This period is distinguished from the trailing-12-month FCF presented in the earnings release.
- Consolidated net income
- 6.135 B$
- Total net adjustments, including non-cash items and working capital¹
- −4.069 B$
- Operating cash flow
- 2.066 B$
- Cash CapEx
- −12.033 B$
- FCF
- −9.967 B$
¹ Total net adjustments calculated as OCF minus net income. This is not a single disclosed line item; it combines non-cash items, working capital, classification differences and other adjustments.
FCF versus the previous quarter · −0.362 → −9.967 B$, a 9.605 B$ deterioration.
04 Financial capacity · Net debt and payment obligations
Previous-quarter net cash · 2025-08-31
Cash and liquid assets 11.005 / Borrowings 91.315 B$
Current-quarter net cash · 2025-11-30
Cash and liquid assets 19.766 / Borrowings 108.075 B$
Net debt deteriorated by 7.999 B$ from the previous quarter. The carrying amount of current borrowings is 8.091 B$. This may differ from the principal maturity schedule.
Even with more long-term contracts, capital expenditure may precede cash receipts from customers. Assess net debt alongside interest costs and equipment lease and purchase obligations.
Common definitions · Cash and liquid assets = cash equivalents + current investments and deposits. Borrowings = carrying amount of interest-bearing debt (current + non-current), excluding separate lease liabilities. This differs from total liabilities of 174.527 B$. Restricted cash, non-current securities and non-current deposits are excluded from cash and liquid assets.
05 Investment, capital allocation and cash recovery
Strong IaaS growth underpins increased investment, but contract balances alone do not guarantee investment returns. Customer-specific contract execution, data center start-up dates and investment-sharing arrangements determine the cash burden.
This quarter, cash CapEx/revenue was 74.9% and FCF/revenue was −62.1%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.
RPO / Backlog
QoQ 455.300 → 523.300 B$ (+14.9% · +68.000 B$).
YoY 97.300 → 523.300 B$ (+437.8% · +426.000 B$).
Remaining performance obligations (RPO) under customer contracts; distinct from total orders or uncommitted negotiations · Contract balances are not equivalent to committed next-quarter revenue or cash inflows. RPO scope differs across companies.
RPO disclosure ↗Quarterly results · CY-aligned view
Amounts in B$. The table shows all 4 quarters of the prior year and the current year's reported quarters, based on the report's CY-aligned year. Each fiscal quarter is assigned to the calendar quarter with the greatest overlap in its actual reporting period; the original FY/CY label and start and end dates are also shown. Amounts have not been recalculated into actual calendar quarters.
| CY alignment | 2024 · 4 quarters | 2025 · 4 quarters | Change this quarter | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Metric | 2024 total4-quarter totalBalances are at period end | 1QFY24 Q323-12-01 ~24-02-29 | 2QFY24 Q424-03-01 ~24-05-31 | 3QFY25 Q124-06-01 ~24-08-31 | 4QFY25 Q224-09-01 ~24-11-30 | 2025 total4-quarter totalBalances are at period end | 1QFY25 Q324-12-01 ~25-02-28 | 2QFY25 Q425-03-01 ~25-05-31 | 3QFY26 Q125-06-01 ~25-08-31 | 4QFY26 Q225-09-01 ~25-11-30 | QoQvs FY26 Q1 | YoYvs FY25 Q2 |
| Revenue | 54.933 | 13.280 | 14.287 | 13.307 | 14.059 | 61.017 | 14.130 | 15.903 | 14.926 | 16.058 | +7.6%+1.132 B$ | +14.2%+1.999 B$ |
| Operating income | 16.647 | 3.750 | 4.686 | 3.991 | 4.220 | 18.475 | 4.358 | 5.109 | 4.277 | 4.731 | +10.6%+0.454 B$ | +12.1%+0.511 B$ |
| Operating margin | 30.3% | 28.2% | 32.8% | 30.0% | 30.0% | 30.3% | 30.8% | 32.1% | 28.7% | 29.5% | +0.8%p | −0.6%p |
| FCF | 9.542 | 3.801 | 3.283 | 5.124 | −2.666 | −13.181 | 0.071 | −2.923 | −0.362 | −9.967 | −9.605 B$ | −7.301 B$ |
| Operating cash flow | 20.287 | 5.475 | 6.081 | 7.427 | 1.304 | 22.296 | 5.933 | 6.157 | 8.140 | 2.066 | −74.6%−6.074 B$ | +58.4%+0.762 B$ |
| Cash CapEx | 10.745 | 1.674 | 2.798 | 2.303 | 3.970 | 35.477 | 5.862 | 9.080 | 8.502 | 12.033 | +41.5%+3.531 B$ | +203.1%+8.063 B$ |
| Net cash | −77.313 | −78.076 | −76.208 | −73.604 | −77.313 | −88.309 | −78.453 | −81.365 | −80.310 | −88.309 | −7.999 B$ | −10.996 B$ |
| Cash and liquid assets | 11.311 | 9.904 | 10.661 | 10.911 | 11.311 | 19.766 | 17.823 | 11.203 | 11.005 | 19.766 | +79.6%+8.761 B$ | +74.8%+8.455 B$ |
| Borrowings | 88.624 | 87.980 | 86.869 | 84.515 | 88.624 | 108.075 | 96.276 | 92.568 | 91.315 | 108.075 | +18.4%+16.760 B$ | +21.9%+19.451 B$ |
Indented rows are components of, or reference items for, the parent metric. Net cash = cash and liquid assets − borrowings. Depending on company definitions, FCF may include additional adjustments such as lease principal and therefore differ from operating cash flow − cash CapEx. See the cash flow discussion for the detailed definition.
Annual totals and year-to-date totals precede the quarters for each year. Revenue, earnings and cash flow are sums of quarterly values; operating margin equals total operating income divided by total revenue; net cash, cash and borrowings are the final quarter's ending balances. Do not make a simple annual comparison of totals covering different period lengths.
Net cash = cash and liquid assets − borrowings. A negative value indicates net debt. Changes in FCF and net cash are shown as absolute amounts in B$. Quarterly values were not adjusted to match disclosed annual totals.
Comparison bases, calculations and quarterly sources
Calculations and presentation · Amounts in B$. US disclosures in millions of dollars were preserved by dividing by 1,000. Where only cumulative cash flow was available, the preceding cumulative amount in the same fiscal year was subtracted. YoY, QoQ and margins were calculated before display rounding. Earnings growth from negative or 0 bases is shown as a sign change and/or absolute amount.
Opinions and outlook · Management quotations include short original excerpts and translations. Unless identified as earnings call transcripts, quotations come from earnings releases. Interpretations and implications are the author's judgments. No numerically unverified probabilities of achieving targets are assigned.