Oracle Corporation 10-Kyear ended 2026-05-31
MixedCEO/CFO changeRestructuringImpairment / charge
Oracle Cloud Infrastructure overtook cloud applications as data-center buildout deepened negative FCF and reliance on external financing.
Filed 2026-06-22 16:12 ET
Key figures · FY2026 · period ended 2026-05-31
- Revenue$67.4BYoY +17.3%
- Operating income$20.6BYoY +16.6%
- Net income$17.1BYoY +37.3%
- Total assets$261.8BYoY +55.5%
- Total debt— Unavailable
- Shareholders' equity$42.5BYoY +107.9%
- Tangible book value−$23.0B1YoY +50.4%
Notes (1)
- Tangible book value: From the notes to the financial statements; the balance sheet does not present this as a separate line.
How this filing reads
- Health−0.3Negative $23.7B FCF and $130B borrowings increase reliance on external financing.
- Momentum+0.5Revenue rose 17% and cloud revenue 39%, with operating income up 17%.
- Outlook−0.2RPO reached $638B, with only 12% expected within 12 months and capital spending rising.
Executive Summary
Oracle’s FY2026 marked a shift toward infrastructure-led cloud growth: revenue increased 17%, and cloud became the majority of sales. Operating income grew 17%, but net income’s faster 37% increase benefited from investment gains rather than equivalent operating improvement. Contracted demand expanded sharply to $638B, while infrastructure spending drove FCF to $(23.7)B and increased reliance on external financing. The investor thesis now depends on converting that demand into profitable, cash-generating capacity before expanding debt, long-duration commitments and dilution outweigh cloud growth.
Key Financial Highlights
FY ended 5/31/2026; balance-sheet figures are at that date.
| Metric | FY2026 | Investor interpretation |
|---|---|---|
| Revenue | $67.4B, +17% Y/Y | Infrastructure drove growth; traditional software was broadly flat. |
| Cloud revenue | $34.0B, +39%; 51% of revenue vs 43% | Cloud is now the dominant revenue source. |
| Operating income | $20.6B, +17%; margin 31%, broadly flat | Higher revenue did not expand consolidated margin. |
| Net income / diluted EPS | $17.1B, +37% / $5.83 vs $4.34 | Investment gains boosted earnings beyond operating growth. |
| OCF / FCF | $32.0B, +54% / $(23.7)B vs $(0.394)B | Operating cash generation fell far short of infrastructure spending. |
| Capital expenditures | $55.7B vs $21.2B | Capacity buildout absorbed substantially more than annual earnings. |
| Total assets | $262B vs $168B | Net property, plant and equipment more than doubled to $100B. |
| Total stockholders’ equity / goodwill | $43.1B vs $21.0B / $62.3B, broadly flat | Goodwill exceeds reported equity, limiting tangible balance-sheet backing. |
| Notes payable and other borrowings, net | $130B vs $92.6B | Expansion increased borrowing and interest costs. |
- Earnings quality: The $2.7B Ampere sale gain materially supported net income; lower intangible amortization also helped. Interest expense rose 29% to $4.60B, absorbing more operating profit.
- Cash conversion: OCF exceeded net income through non-cash adjustments and favorable working-capital movements, including $4.6B of customer prepayments with a significant financing component; this cash precedes future service delivery.
- Segment economics: Cloud and software segment margin declined to 59% from 63% as infrastructure expenses outpaced revenue; these margins exclude certain corporate costs.
- Financing and liquidity: Senior-note issuance of $43.0B principal and $5.0B preferred-stock proceeds supported expansion; cash and marketable securities reached $31.9B, alongside an undrawn $10.0B revolving facility.
- Capital return and dilution: Repurchases of $0.093M billion ($0.093B) did not offset issuance: shares outstanding increased 2.6%, or 73M, to 2.88B; stock-based compensation was $4.81B, and common dividends declared were $5.73B.
- Tax effects: A $0.933B tax-law-related charge was substantially offset by increased stock-compensation tax benefits of $1.5B, complicating comparisons of underlying earnings.
Business Developments
Oracle Cloud Infrastructure revenue grew 77% to $18.1B, overtaking cloud applications, which grew 11% to $15.9B. Management’s strategy combines installed-base migration with new AI workloads, multicloud database services and sovereign deployments; the resulting mix places greater emphasis on capital-intensive infrastructure than traditional software.
Remaining performance obligations increased to $638B from $138B, primarily through large cloud contracts. Oracle expects ≈12% to be recognized within 12 months, so most contracted revenue lies beyond the near-term funding cycle. Data-center expansion supports that demand, but management expects capital spending to increase further in FY2027 and later years.
A cloud- and AI-related efficiency program generated $1.78B of restructuring costs against estimated total costs of up to $2.1B. New co-chief executives and a new chief financial officer will oversee a business increasingly defined by capacity delivery and financing execution.
Risk Assessment
- Capacity and contract mismatch: Additional data-center lease commitments of $260B generally run 15–19 years; delays, underutilization or customer nonpayment could leave fixed obligations unsupported by revenue.
- Funding and refinancing: Negative FCF, rising borrowings and additional post-year-end infrastructure purchase commitments of $19B increase dependence on financing access and expose returns to higher funding costs.
- Supply and power constraints: Limited electricity, equipment and single-source components can delay deployment or raise costs that fixed-price customer contracts may not recover.
- Competition and AI returns: Intense hyperscaler competition, pricing pressure and uncertain AI adoption could weaken utilization and profitability just as Oracle expands capacity.
- Shareholder dilution: Mandatory convertible preferred stock and a $20B common-stock offering program create additional dilution potential; no common shares had been sold under the program at year-end.
- Cybersecurity and regulation: Sensitive customer data and expanding AI services expose Oracle to outages, litigation, privacy penalties and regulatory restrictions that could impair renewals.
- Tax and currency exposure: Gross unrecognized tax benefits were $10.1B; a modeled 10% currency-rate decrease would reduce pretax earnings from foreign-currency-sensitive revenue by $2.77B, before other offsets.
Strategic Outlook and Investor Actionables
Oracle’s opportunity is unusually large, but backlog growth alone does not establish economic returns. Near-term performance must demonstrate that capacity becomes productive faster than commitments, depreciation and financing costs accumulate.
- Demand conversion: Monitor recognized cloud revenue and remaining performance obligations; sustained infrastructure growth must validate the contracted-demand pipeline.
- Investment productivity: Track cloud and software segment margin, capital expenditures and OCF; margin stabilization and a narrowing FCF deficit would support the investment thesis.
- Financing burden: Monitor borrowings, interest expense and net shares outstanding; faster financing-cost or dilution growth than operating income would weaken common-shareholder returns.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
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