Oracle Earnings Preview: OCI and Long-Term Returns on CAPEX comments in Focus
$Oracle(ORCL)$
The market is already expecting a print that looks close to 20% revenue growth and roughly 15% EPS growth. The real issue now is whether Oracle can turn all that demand into recognized revenue fast enough, while maintaining cost control and keeping its financing and capital expenditure path clear and manageable.
Earnings Forecast
Wall Street is looking for roughly $16.9 billion in revenue and adjusted EPS of about $1.70 to $1.71.
The elevated Q2 figure stems from Oracle's divestiture of its stake in Arm-based server chip maker Ampere, which generated approximately USD 2.7 billion in pre-tax gains, or roughly USD 0.75 per share.
Two Things to Watch
RPO and OCI growth
At the end of last quarter, Oracle's total remaining performance obligations, or RPO, stood at $523.3 billion.
The portion expected to be recognized within the next 12 months rose 40% year over year. Meanwhile, total cloud revenue in the prior quarter reached $7.98 billion, up 34%, while OCI revenue came in at $4.08 billion, up 68%.
That is why investors are shifting their attention away from how many deals Oracle signs and toward how much capacity it can actually deploy and monetize.
On the supply side, Oracle did provide some encouraging signals last quarter. The company said it now has 147 live customer cloud regions, with another 64 planned. It also delivered nearly 400 megawatts of data center capacity to customers during the quarter, increased GPU delivery capacity by 50% sequentially, and deployed more than 96,000 NVIDIA GB200 GPUs at the Abilene, Texas supercluster.
Capital intensity and cash flow
Oracle's capital expenditures for the first half of fiscal 2026 reached $20.5 billion. Over the last 12 months, operating cash flow totaled $22.296 billion, while capex came in at $35.477 billion, resulting in negative free cash flow of $13.181 billion.
Management also said last quarter that fiscal 2026 capex would run about $15 billion higher than expected after the Q1 report, and that spending would likely continue rising over the following several fiscal years.
To fund that buildout, Oracle announced on February 1 that it plans to raise $45 billion to $50 billion in calendar 2026, with about half expected to come from equity-linked financing and common stock issuance, including up to $20 billion through an ATM program, and the other half from investment-grade unsecured debt. Oracle said the money is intended to support signed customer demand from names including AMD, Meta, NVIDIA, OpenAI, TikTok, and xAI.
The problem is that markets do not only ask whether a company can raise capital. They also ask whether it needs to do so because the business model is becoming more asset-heavy than investors originally signed up for.
Option Playbook
Options are pricing roughly a ±11% move on the earnings print. Historically, Oracle's shares have finished higher in 5 of the past 9 earnings reactions.
Bottom Line
Under the AI megatrend, the market is gradually losing interest in capital-heavy neoclouds that keep spending with returns still far off. By contrast, “selling shovels” right now—optics, memory/storage, and power—looks like a much simpler way to make outsized money.
This earnings release, unless OCI and RPO come in well above market expectations, is likely to provide only limited support for the stock price based on headline results alone.
The potential upside surprise may instead come from management's commentary on the earnings call—offering a compelling long-term bullish narrative around capacity deployment, customer payment terms, and the payback cycle for capital expenditures.
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