Oracle Faces AI Spending Test in Q1 Earnings

Oracle reports fiscal first-quarter 2027 earnings after the market close on Thursday. The results will test whether rising cloud revenue can offset soaring capital expenditures. Wall Street expects adjusted earnings of $1.74 per share on revenue of $19.14 billion, representing roughly 28% year-over-year growth, according to FactSet data. Management previously guided for total cloud revenue growth of 58% to 64%.

Jefferies analyst Brent Thill projects Oracle Cloud Infrastructure revenue could accelerate up to 115%, compared to 93% in the prior quarter. Mizuho Securities maintains an Outperform rating with a $320 price target, noting that roughly 1 gigawatt of new capacity is scheduled to come online this quarter. Oracle closed at $161.63 on Wednesday, down roughly 20% over the past three months and more than 50% below its September 2025 peak. Options imply an 11% post-earnings price swing, below its four-quarter average move of 16%.

The company backlog reached $638 billion, up 363% from a year ago and up from $553 billion in the previous quarter. Reports indicate roughly half of that backlog ties to OpenAI. Oracle has recorded negative free cash flow for five consecutive quarters, posting negative free cash flow of $23.7 billion in fiscal 2026 despite record operating cash flow of $32 billion. Capital expenditures more than doubled to $55.6 billion in fiscal 2026, and fiscal 2027 net capex guidance stands at $70 billion to $95 billion. Mizuho expects free cash flow to turn positive in fiscal 2029.

Investors are monitoring whether Oracle maintains its target of converting roughly 12% of backlog into revenue over the next year. Attention also centers on unconfirmed reports of workforce cuts between 7,000 and 10,000 employees.