Oracle's fiscal third-quarter earnings, reported on Monday evening, delivered the clearest validation yet of its AI infrastructure strategy and offered a partial answer to a question that had hung over the stock for months: whether its costly data centre buildout would generate adequate returns.
Shares surged roughly 11% in premarket trading on Tuesday, extending a recovery from persistent pressure tied to concerns about balance-sheet strain and potential software disruption from AI.
The headline figure drawing most attention is a remaining performance obligation — effectively contracted but not yet recognised revenue — of $553bn, which analysts and investors have taken as evidence that demand for Oracle's AI cloud capacity is genuine and durable. The company also raised its fiscal 2027 revenue outlook, though specific figures were not disclosed in the available sources.
The results come six weeks after Oracle announced a $50bn financing package at the start of February, comprising approximately $25bn in senior notes at various maturities and a $5bn convertible preferred offering. That deal, though oversubscribed, rattled equity investors concerned about dilution and prompted credit default swap spreads to widen as bond investors questioned Oracle's ability to maintain its investment-grade rating, currently two notches above junk.
Oracle's relationship with OpenAI remains central to the investment case. The company has committed to delivering eight data centre sites to OpenAI, and a source familiar with the matter told CNBC that those deliveries remain on track. Reports late last week that Oracle and OpenAI had failed to agree on an expansion of their Abilene, Texas facility proved less damaging than feared: OpenAI's infrastructure chief Sachin Katti confirmed the company had simply directed additional capacity to other US locations, including a new site in Wisconsin being built with Oracle.
Chairman Larry Ellison used the earnings call to push back against fears that AI would cannibalise Oracle's core software business, a concern that had weighed on the stock alongside the debt load. Analyst speculation ahead of results had included the possibility of a workforce reduction of 20,000 to 30,000 employees and potential asset divestitures to shore up free cash flow, according to a TD Cowen note from January.
The market reaction suggests investors, for now, are willing to accept Oracle's argument that its AI bet is beginning to pay off.
