Oracle Corp. (NYSE:ORCL) is doubling down on its artificial intelligence (AI) ambitions, forecasting a $15 billion increase in capital expenditures for fiscal 2026 to fulfill a record-breaking $523 billion backlog, along with an additional $4 billion in sales by fiscal 2027 amid faster backlog conversion.
The Cost Of Ambition
The database giant reported a mixed second quarter, beating earnings estimates with a 54% jump in adjusted EPS to $2.26, but missing revenue expectations at $16.06 billion.
However, the focal point for Wall Street was the company's remaining performance obligations (RPO), which exploded to $523 billion—up 433% year-over-year.
To convert these contracts into revenue, Oracle must rapidly build its infrastructure. Principal Financial Officer Doug Caring announced that fiscal 2026 CapEx would be approximately $15 billion higher than previously forecasted.
“We will pursue further business expansion only when it meets our profitability requirements,” Caring stated, noting that the backlog includes massive contracts with AI leaders like Nvidia Corp. (NASDAQ:NVDA) and Meta Platforms Inc. (NASDAQ:META).
Revenue Outlook Raised By $4 Billion
Despite the immediate costs, management remains bullish on the payout. The company raised its fiscal 2027 revenue outlook by $4 billion, citing the accelerated conversion of its massive backlog.
With cloud infrastructure revenue already up 66% and 64 new cloud regions planned, Oracle is betting that today's spending will secure its dominance in the AI era.
See Also: Nvidia Stock Dips After Oracle Snub: Larry Ellison Calls It ‘Chip Neutrality’
Analyst View: ‘Right Investments’ Despite Volatility
The sharp rise in spending ignited concerns over free cash flow, which sat at negative $10 billion for the quarter. Daniel Newman, CEO of the Futurum Group, acknowledged the market’s skittishness but defended the strategy.
“ORCL is tricky short term but long term I believe it is making the right investments,” Newman said following the report.
He argued that the after-hours sell-off was an “overreaction,” likening Oracle's capital-intensive pivot to necessary foundational shifts seen elsewhere in big tech.
“Oracle has to do what it's doing even if it means short term volatility,” Newman added, emphasizing that the company is effectively positioning itself as a critical pillar of AI infrastructure.
ORCL Tumbles After Mixed Q2
Shares slipped by 11.53% in after-hours trading after gaining 0.67% on Wednesday. Year-to-date, the shares were 33.83% higher, whereas they rose by 25.65% over the last six months.
It maintains a weaker price trend over the short and medium terms but a strong trend in the long term, with a poor value ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.
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