Oracle Stock Jumps on Earnings Beat — Barrons.com
By Adam Levine
Oracle reported strong third-quarter earnings results Tuesday afternoon. Its shares were rising in after-hours trading.
Oracle's adjusted earnings-per-share came in at $1.79, above Wall Street's consensus estimate of $1.70, and up from $1.47 last year. Revenue for the quarter reached $17.2 billion, ahead of expectations for $16.9 billion, and up 22% on the year.
Shares were up 6% in after-hours trading following the report.
This is breaking news. Read a preview of Oracle's earnings below and check back for more analysis soon.
Oracle began transitioning into a cloud company several years ago, and the process is at a crucial juncture as it reports its third-quarter earnings on Tuesday afternoon.
Wall Street analysts expect adjusted earnings per share of $1.70, up from $1.47 a year earlier. They are projecting sales growth of 20% to $16.9 billion.
The return to rapid growth has been driven by the cloud pivot. From fiscal year 2012 through 2020, Oracle sales grew at a 1% annualized rate, but growth has accelerated since then. The two-pronged strategy saw Oracle finally begin to offer cloud-based versions of its software after years of resisting the shift. Oracle gained a more reliable stream of revenue, while customers saw fewer internal IT risks and costs. Last quarter, cloud applications sales rose by 11% from a year earlier.
But the larger part of the shift has been offering servers for rent in the cloud, a business pioneered by Amazon Web Services, and now includes Microsoft, Alphabet and a host of smaller "neoclouds" like CoreWeave. Powered by a $300 billion multiyear contract with AI leader OpenAI, this business saw revenue grow 68% last quarter.
The two cloud businesses now make up about half of sales, and if current trends continue, they could come to dominate Oracle's income statement before long. Sales growth for the rest of Oracle was flat in the first half of fiscal 2026.
But the cloud sales growth comes at a high cost. Oracle's revenue was stagnant in the 2010s, but the company churned out a lot of free cash flow that was returned to shareholders as dividends and share buybacks, drastically reducing the company's share count in the process.
The capital expenditures required to build the AI data centers the company rents out in the cloud have reversed that dynamic. Though operating cash flow remained strong in the last 12 months, it was dwarfed by capex. Just in the first six months of fiscal 2026, Oracle's debt and lease liabilities rose by $23 billion, and it has commitments for another quarter-trillion dollars in leases. Buybacks have all but halted and the share count has begun rising. The dividend is effectively being funded by debt.
Last month, Oracle said it expects to raise up to $50 billion through 2026 via equity and debt sales.
While investors were initially wowed by cloud revenue and backlog growth, enthusiasm faded beginning in September as the scale of the costs sank in. The stock has fallen 56% since that peak.
Write to Adam Levine at adam.levine@barrons.com
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