EARNINGS REVIEW
Oracle, FY26 Q3 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.
IaaS growth accelerated to 84%, and RPO increased. Upfront cash investment remained substantial, but contracts involving customer prepayments or customer-provided equipment began changing the funding structure.
Assessment · Operating growth and order trends improved. However, as negative FCF continues, assess how much customer prepayments and equipment-supply arrangements actually reduce the cash burden. RPO growth alone is not used to quantify the likelihood of investment recovery.
Key management and company statements
Earnings release · Short original excerpt“The demand for cloud computing for AI training and inferencing continues to grow faster than supply.”Meaning · Demand for cloud services for AI training and inference is growing faster than supply.
Context · This is a company statement. It is not attributed to an individual CEO or CFO without verification.
Original statement ↗01 Revenue, operating income and results versus expectations
Year over year · Revenue 14.130 → 17.190 B$ (+21.7% · +3.060 B$), Operating income 4.358 → 5.464 B$ (+25.4% · +1.106 B$).
Quarter over quarter · Revenue 16.058 → 17.190 B$ (+7.0% · +1.132 B$), Operating income 4.731 → 5.464 B$ (+15.5% · +0.733 B$), Operating margin 29.5% → 31.8% (+2.3%p).
IaaS revenue of approximately 4.9 B$ grew 84%, and SaaS revenue of approximately 4.0 B$ grew 13%. Total revenue growth of 22% includes foreign-exchange effects; constant-currency growth was 18%.
02 Earnings sustainability · From operating income to net income
Operating income rose to 5.464 B$, but net income declined sequentially. Distinguish the impact of the prior quarter's approximately 2.700 B$ Ampere disposal gain not recurring.
Consolidated net income this quarter was 3.721 B$, while income attributable to common shareholders after preferred dividends was 3.699 B$. Net income is not conflated with the numerator used for EPS.
- Operating income
- 5.464 B$
- Net non-operating income/loss
- −1.048 B$
- Income tax expense
- −0.695 B$
- Consolidated net income
- 3.721 B$
Net income of 3.721 B$ in the existing quarterly data is on a consolidated basis.
03 Cash flow quality · Net income → OCF → FCF
Quarterly FCF was −11.484 B$, calculated as OCF of 7.151 B$ less cash CapEx of 18.635 B$. Despite higher OCF, larger equipment spending pressured FCF.
- Consolidated net income
- 3.721 B$
- Total net adjustments, including non-cash items and working capital¹
- 3.430 B$
- Operating cash flow
- 7.151 B$
- Cash CapEx
- −18.635 B$
- FCF
- −11.484 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 · −9.967 → −11.484 B$, a 1.517 B$ deterioration.
04 Financial capacity · Net debt and payment obligations
Previous-quarter net cash · 2025-11-30
Cash and liquid assets 19.766 / Borrowings 108.075 B$
Current-quarter net cash · 2026-02-28
Cash and liquid assets 39.132 / Borrowings 134.605 B$
Net debt deteriorated by 7.164 B$ from the previous quarter. The carrying amount of current borrowings is 9.887 B$. This may differ from the principal maturity schedule.
The company announced a debt and equity financing plan of up to 50.000 B$ in February and later said it raised a combined 30.000 B$ through investment-grade bonds and mandatory convertible preferred stock. The full amount is not classified as interest-bearing borrowings.
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 206.189 B$. Restricted cash, non-current securities and non-current deposits are excluded from cash and liquid assets.
05 Investment, capital allocation and cash recovery
According to the company, a substantial portion of major new AI contracts in Q3 involved customer prepayments or customer-provided GPUs. These terms are not generalized to all existing contracts.
This quarter, cash CapEx/revenue was 108.4% and FCF/revenue was −66.8%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.
06 Next-quarter and full-year outlook and implications
YoY +19.0%~+21.0% · QoQ +10.1%~+11.9%. Comparison revenue was 15.903 B$ in the corresponding prior-year quarter and 17.190 B$ in the current quarter. Growth rates were calculated from the underlying amounts.
The company guided to next-quarter USD revenue growth of 19~21%. The B$ range above is calculated by applying those growth rates to revenue of 15.903 B$ in the corresponding prior-year quarter.
The FY2026 revenue outlook of 67.000 B$ and CapEx outlook of 50.000 B$ were maintained, while the FY2027 revenue outlook was raised to 90.000 B$.
RPO / Backlog
QoQ 523.300 → 552.600 B$ (+5.6% · +29.300 B$).
YoY 130.200 → 552.600 B$ (+324.4% · +422.400 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 | 2025 · 4 quarters | 2026 · 1 quarter | Change this quarter | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Metric | 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 | 2026 YTD1-quarter totalBalances are at period end | 1QFY26 Q325-12-01 ~26-02-28 | QoQvs FY26 Q2 | YoYvs FY25 Q3 |
| Revenue | 61.017 | 14.130 | 15.903 | 14.926 | 16.058 | 17.190 | 17.190 | +7.0%+1.132 B$ | +21.7%+3.060 B$ |
| Operating income | 18.475 | 4.358 | 5.109 | 4.277 | 4.731 | 5.464 | 5.464 | +15.5%+0.733 B$ | +25.4%+1.106 B$ |
| Operating margin | 30.3% | 30.8% | 32.1% | 28.7% | 29.5% | 31.8% | 31.8% | +2.3%p | +0.9%p |
| FCF | −13.181 | 0.071 | −2.923 | −0.362 | −9.967 | −11.484 | −11.484 | −1.517 B$ | −11.555 B$ |
| Operating cash flow | 22.296 | 5.933 | 6.157 | 8.140 | 2.066 | 7.151 | 7.151 | +246.1%+5.085 B$ | +20.5%+1.218 B$ |
| Cash CapEx | 35.477 | 5.862 | 9.080 | 8.502 | 12.033 | 18.635 | 18.635 | +54.9%+6.602 B$ | +217.9%+12.773 B$ |
| Net cash | −88.309 | −78.453 | −81.365 | −80.310 | −88.309 | −95.473 | −95.473 | −7.164 B$ | −17.020 B$ |
| Cash and liquid assets | 19.766 | 17.823 | 11.203 | 11.005 | 19.766 | 39.132 | 39.132 | +98.0%+19.366 B$ | +119.6%+21.309 B$ |
| Borrowings | 108.075 | 96.276 | 92.568 | 91.315 | 108.075 | 134.605 | 134.605 | +24.5%+26.530 B$ | +39.8%+38.329 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.