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Oracle Q4 FY2026 earnings conference call

Key Takeaways (AI-Generated)

Financial Performance

- Q4 revenue reached a record $19.2 billion, up 21% in U.S. dollars

- Cloud infrastructure revenue grew 93%, driven by strong demand for AI workloads and database services

- Non-GAAP EPS reached $2.11 in Q4, up 24% (20% excluding one-time gains)

- Strong cash flow from operations of $32 billion, up 54%

Business Highlights

- Remaining Performance Obligations reached an unprecedented $638 billion, up 363%

- Signed $67 billion in AI infrastructure contracts in Q4, the majority being bring-your-own-hardware or prepaid

- Global GPU utilization rate of 97.5% with a 92% renewal rate on expiring GPUs

- Deployed over 1,000 AI agents across application suites

Financial Guidance

- FY27 total revenue growth expected at +34% in constant currency

- FY27 non-GAAP EPS guidance of $8.05, up 18% in constant currency

- Q1 FY27 total revenue growth expected between 27-29% in U.S. dollars

- Plan to raise around $40 billion in debt and equity in FY27

Opportunities

- AI infrastructure market described as 'trillions of dollars per year' with Oracle positioned strategically

- Over 1,000 AI agents deployed across application suites with continuous AI feature additions

- Multi-cloud partnerships expanding with new regions and competitor cloud integrations

- High GPU utilization rates and efficient data center operations driving strong returns

Full Transcript (AI-Generated)

Operator

Well, good day, everyone, and welcome to the Oracle Corporation Fourth Quarter Fiscal Year 2026 Earnings Call. Just a reminder, this call is being recorded. If you have a question today, please press *1 on your telephone keypad. Please limit your questions to one. I would now like to hand the conference over to Mr. Ken Bond. Please go ahead, Sir.

Ken Bond

Thank you, Lisa, and good afternoon, everyone. Welcome to Oracle's fourth quarter and fiscal year 2026 earnings conference call. On the call today are Chief Executive Officer Mike Cecilia, Chief Executive Officer Clay McGirt and Chief Financial Officer Hilary Maxson.

A copy of the press release including financial results tables, supplemental financial metrics and guidance are now available from the Investor Relations website. Also is a slide deck being introduced this quarter which you'll see momentarily. A GAAP to non-GAAP reconciliation, other supplemental financial information and list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently. These items will be available after today's call.

As a reminder, today's discussion will include forward-looking statements and we will make some important comments around factors relating to our business. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements and we encourage you to review our most recent reports including our 10-K and 10-Q and any applicable amendments.

And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking any questions, we'll begin with a few prepared remarks. And with that, I'll turn the call to Hilary.

Hilary Maxson

Hi, Ken. Hi, everyone. Great to be here with you today. And as this CFO, I thought I'd start with a few thoughts on why I'm so excited to join Oracle at this time. I've spent my career all around the world at companies that use technology and data to drive transformation, both internally and for customers, and I believe that the most valuable transformational change sits at the intersection of the physical and virtual worlds across business models, from infrastructure to enterprise software.

Oracle understands that intersection and is now uniquely positioned for one of the most significant technology transitions we've seen in decades. Very few companies can help customers across the entire technology stack, from the cloud infrastructure that powers AI workloads to the mission-critical applications that run their businesses. Oracle can do both.

Plus, this is a company with the technical expertise, differentiated technology, and a long history of helping customers turn technology innovation into tangible business value. And now I've only been here for two months. Everything I've seen has reinforced my confidence in the company's strategy, execution, and opportunity ahead. I'm excited to be part of the team and look forward to helping Oracle capitalize on the opportunities in front of us to drive return on investment and shareholder value.

And as we pursue these opportunities, we'll remain focused on disciplined capital allocation, maintaining a strong balance sheet, and preserving our investment-grade credit rating. With that, let me turn to our Q4 and fiscal Year 2026 results. And like Ken said, we've introduced a short presentation to accompany our earnings call, so you can follow along with the numbers and key comments we'll make today.

In terms of Q4, it was a record quarter driven by strength in both our cloud infrastructure and cloud apps business. Revenue was $19.2 billion, up 21% in U.S. dollars. Cloud infrastructure revenue grew 93%, reflecting strong demand for both AI workloads and our database services, and cloud apps was up double digits at plus 10%. Michael Clay will give more detail on these businesses in just a moment.

Our non-GAAP operating income increased 22% in U.S. dollars to $8.6 billion, driven by our strong revenue progression. Our operating margin increased slightly, with our gross margin declining due to impacts from ramping up our data centers and the acceleration in our infrastructure revenue. This was more than offset in the quarter by a reduction in operating costs. And for us, that's the lines in our P&L. Starting with sales and marketing, due to efficiency actions in our cost structure, our non-GAAP EPS reached $2.11 and increased.

Of 24% in U.S. dollars for the quarter due to a one-time net gain on investment. Excluding this, our non-GAAP EPS increased by 20%. Turning to the full year, we surpassed revenues of $67 billion for the first time, which translated into strong non-GAAP operating income of $29 billion, up 16% in U.S. dollars.

For the year, our non-GAAP EPS was up 27% in U.S. dollars to $7.63, including one-time gains on investment. Excluding these gains, our non-GAAP EPS was $6.83 for the full year. Our gross margin stepped down around 5 points as expected, as we start to see the impacts from the build-out of our infrastructure business, with the acceleration in its revenues primarily offset by lower operating costs as a percentage of revenue driven by operating efficiencies.

All of this translated into strong cash flow from operations of $32 billion, up 54%. We did continue with our program of capital investments tied to unlocking the strong growth opportunities in front of us. Our net cash outlay for capital expenditures for the full year was $48 billion, taking into account prepayments and timing impacts of around $8 billion. You can see the table showing the details of net cash outlay for CapEx in our press release.

We think this measure is important to better understand our funding needs and our remaining performance obligations or RPO finished at $638 billion of 363%. This unprecedented level of RPO provides exceptional visibility into our future revenue growth, all supported by long term contractual customer commitments and reflects the strong customer demand we see across both AI infrastructure and cloud services.

To give a bit more detail on our RPO, we expect 12% to be recognized in the next 12 months and another 34% between 13 and 36 months. And these percentages are both expected to accelerate over the coming quarters based on our current long term outlook. Mike and Clay will now get into a bit more detail on our cloud businesses and then I'll be back with our outlook for fiscal year 27 and Q1.

Mike Cecilia

Thank you, Hillary, and welcome to Oracle. So I'm going to cover our cloud apps and cloud database business in a bit more detail, both of which performed quite well in Q4. We're on the front end of one of the most interesting clients in the technology business. Our customers are now focused on how to leverage AI in their own businesses. They want AI to increase productivity, enhance customer service, and create real competitive advantages. They want to do it quickly and within their existing budget envelope.

Oracle's unique advantage is that we deliver the applications, the data, the infrastructure, the AI tooling, and the industry expertise together. That combination invariably puts us in the center of customer conversations, whether they're existing Oracle customers or not. And our customers have moved past the experiment stage with AI. They are ready to implement enterprise grade complete agentic solutions to help run their businesses.

Over the past year, we have delivered more than 1000 AI agents across our application suites. These agentic based offerings can reason, decide and execute work across processes. So the quickest, most affordable and most productive way customers can begin consuming AI is just to continue using Oracle's applications since every three months they get more and more of the AI features built for them and ready to go.

This is a major shift in enterprise software and Oracle is uniquely positioned to lead it and you can see it in our Q4 results. Oracle Cloud applications generated revenues of $4.1 billion, which is up 10% and our SAS deferred revenue was up 16% in the quarter. Across the company, we took thousands of customers live last quarter, over 300 in Fusion alone.

Exelon adopted our utilities platform to manage operations. Wright County Sheriff's Office went live with our public safety suite, Westfield Insurance implemented Fusion ERP and Piraeus Bank went live with the work of banking, just to name a few. All of these customers are upgrading to a better and modern applications platform that also comes with AI built right in.

In Q4, we also continued our electronic health record deployment at the United States Department of Veterans Affairs. In Q4, we added four VA medical centers in Michigan and in early June added another 4 VA medical centers in Ohio. The worker now supports 14 VA medical centers serving 29,000 clinicians and 500,000 veterans across the United States.

And while not part of our Q4 bookings, the United States government Office of Personnel Management Today announced an agency wide award to Oracle for Fusion ACM. So this is obviously a strong start for us in our FY20 7 applications business. In addition to discussions around AI in our applications, I'm also having very interesting conversations with our customers around leveraging their own proprietary data sets with AI.

Much of this data already sits in an Oracle database or is generated by Oracle applications. For many enterprises, inferencing against decades of rich operations data is where the benefits of AI compound exponentially. Oracle's full stack offerings allow customers to get up and running quickly, leveraging AI together with their private data sets.

This is why Claro, a major telecommunications provider in Latin America, chose OCI Field Services applications and our AI data platform to automate customer service for their 30 million subscribers this quarter. UK National Health Services share business services OS the Brazilian retailer A QXO, the fastest growing building products distributor in the United States. Combine AI ready Oracle infrastructure or database products with Oracle applications to move their businesses forward again just to name a few.

Last quarter we also released a long list of made for new AI functionality in the Oracle database. Here are just two examples. The Oracle AI agent memory is a library that helps developers build agents that can remember, reason and act with enterprise context. Oracle Deep Data Security has data access rules at the database level. This protects against both authorized access. It limits precisely what data a user and any AI agent acting on their behalf can see or act upon.

All of these innovations I've just described and many more are available in our cloud, our partners clouds and in our customers environments. In Q4, our cloud database business revenue grew by 29%, but multi cloud growing much faster. Multiple cloud revenue was up 404% year over year and bookings were up 325% year over year.

One example of an enterprise using a wide range of Oracle technologies in Vodafone who turned to us in Q4 to consolidate and modernize their operations. Vodafone selected OCI dedicated region and their data centers, our multi cloud database offering and a partner cloud and our applications to reduce costs and run their processes faster, in some cases up to 60% faster.

Finally, we are working with our customers to deliver quick ROI within their AI budgets. To do so, we are simplifying how customers consume and pay for agentic capabilities. Our new agentic pricing aligns with customer value. Now much of our AI innovation in our core applications continues to be included at no extra charge.

However, customers can also purchase additional agenda capacity in a simple predictable way by purchasing bundles of tokens that can be used across our application suites. We're also introducing outcome based commercial models that align pricing directly to the value derived. For example, interview agents that are priced based on the number of candidates screened or hospitality of sale agents priced on the percentage of end consumer of sale transactions.

In Q4, we started a limited rollout of our token bundles and had 33 customers like AEON Services Corporation and Liberty Energy free purchase tokens that have access to more advanced reasoning and models. All of this helps our customers control their costs and align their spending with the value being generated. And with that, I will turn it over to Clay.

Clay Mcgirt

Thanks, Mike. OK, you just heard from Mike about our applications and database businesses. Oracle has been in these businesses for decades and they continue to impress us because of their ability to continually grow aggregate margin dollars through a combination of durable differentiation and increase in market size. I want to share how we see our infrastructure business in that same category and the evidence that enforces that movie.

OK. Differentiation comes in many forms: technological innovation, supply chain execution, operational ability, and more. We created OCI as the most highly secure, highest performance, most flexible, and lowest-cost infrastructure available anywhere. We deliver that through innovation across all layers—from deploying the smallest to the largest clouds—to inventing technologies like Celeron that provide the highest performance and lowest-cost networks.

We combine the power of OCI and Fusion Applications into an incredibly efficient and flexible supply chain. We architect across data center design, power distribution, data hall layout, and networking to deliver the most efficient and flexible infrastructure available anywhere. Oracle has a long track record of durable differentiation. This is because we know the real differentiator is the organization—the people, the company itself—that can adapt to new requirements, invent solutions, and deliver them to customers.

OCI has been the fastest-growing cloud provider for years, and now with AI infrastructure, we’ve demonstrated to everyone the power of the organization we’ve built, the technology we’ve created, and the value we’re delivering to customers. OCI is continually releasing new services, hardware, networks, and cloud regions to ensure we remain the best place for our customers’ infrastructure workloads.

Cloud infrastructure has become a very large market due to the ever-growing demand for server-side computing. AI infrastructure makes the existing cloud infrastructure market look small. Everything we see indicates this market will reach trillions of dollars per year. Combined with our previously outlined 30% to 40% margin profile, OCI should grow into an extremely large and extremely profitable business.

These beliefs are supported by compelling and multiplying amounts of evidence. We signed $67 billion in AI infrastructure contracts this quarter, the majority of which were either bring-your-own-hardware or prepaid. This increases our total bring-your-own-hardware or prepaid customer contracts to $75 billion, with those contracts showing no degradation in margin compared to our other contracts.

Customers are demonstrating they choose OCI to deliver their infrastructure—even when they are providing the capital themselves. The design, delivery, and operation of this large-scale infrastructure is extremely demanding. In Q4, we finalized an impressive FY2026, delivering more than 1.2 gigawatts to customers. Our pace of delivery continues to accelerate, with FY2027 Q1 deliveries approaching 1 GW—nearly the same capacity we delivered in the previous four quarters combined.

There will be many winners in AI, and our strategy is to have them all as customers. We continue to diversify across our largest customers, with four customers contracting for more than $8 billion this quarter. Our infrastructure is fundamentally multi-tenant, and we continually allocate capacity among customers. In Q4, 30,500 GPUs from 59 separate customers were up for renewal. 49% of those customers renewed for 92% of those GPUs.

That doesn’t mean, however, that 8% of those GPUs are idle. Most of those GPUs were subsequently sold to other customers in the same quarter. Our global GPU utilization rate is 97.5%. It’s also clear that AI is here to stay. AI is delivering value on multiple fronts, but the clearest and most obvious is agentic coding.

This is an area where we have a front-row seat as both the provider and the consumer. Agentic coding tools have completely changed the game. At Oracle, we operate these tools ourselves and see no slowdown in our own demand for such capabilities. The same holds true for all the customers and partners we work with. The demand for AI infrastructure in this domain alone is enormous—ignoring the many, many other growth areas.

OK, now before I end, let’s look at the summary of our five largest sites and the significant progress we’re seeing across all of them. To begin, let’s look at Abilene, TX. Abilene, TX has today delivered 42% of its total capacity. An additional 35% of capacity will be delivered in the next 90 days, with the remainder delivered in the subsequent quarter.

Moving forward to Shackleford, Texas, we contracted this in August of 2025. Customer delivery begins in the first half of calendar year 2027—sorry, the first half of calendar year 2027. 115 megawatts of power capacity is already available online, more than one month ahead of schedule. If we take a look at Dona Ana County, New Mexico, we contracted this in September of 2025. Customer delivery also begins in the first half of calendar year 2027. The power design is based on gigawatts of clean, energy-efficient Bloom Energy fuel cells.

Looking at Saline, Michigan, we contracted this in October of 2025. Customer delivery begins in the second half of 2027. The network core is ahead of schedule and will be delivered by the end of this calendar year. And then to the final site I want to touch on: Port Washington, Wisconsin. This was contracted in September of 2025, and delivery begins in the second half of calendar year 2027.

I think you can see from all of these pictures the massive progress we're making across a very large number of sites. It's an incredible time to be in technology and to have the privilege of doing that at a company like Oracle. It's especially exciting to have an inside view of the birth of a new business that can join the likes of our applications and database businesses. Hopefully, these beliefs and data points give you some insight into why we are so excited about OCI and where it’s going to take us. And with that, I'm going to hand it back to Hillary.

Hilary Maxson

Thanks, Clay. Before I get to our fiscal year 2027 and Q1 guidance, I'd like to share some comments on our funding expectations. As we’ve mentioned throughout the call, we see compelling opportunities at Oracle based on our portfolio positioning, and our strong Q4 results reflect this well. Customer demand and our growing visibility into future revenues underpin the long-term financial outlook we shared at our most recent Analyst Day: plus 31% revenue CAGR and plus 28% EPS CAGR through fiscal year 2030.

In order to unlock this unique growth opportunity, we launched a capital investment program. We’ll continue those investments in fiscal year 2027, with an expected net cash outlay for capital expenditures of around $70 billion. This includes customer prepayments and timing impacts expected to amount to approximately $20 to $25 billion, so our reported CapEx will be higher by this amount.

Importantly, these investments are being driven by committed customer demand, as reflected in our record RPO, giving us confidence in our long-term outlook as well as strong returns on the capital we’re deploying. As Clay already mentioned, this demand is enabling us to secure customer prepayments and ‘bring your own hardware’ arrangements at similar or better margins than the rest of our contracts.

To support our capital investment program, we expect to raise around $40 billion in debt and equity in fiscal year 2027, which includes our previously announced $20 billion at-the-market equity issuance. We do not anticipate raising additional debt funding in calendar year 2026 beyond what is already included in our fiscal year 2027 guidance.

You can already see the strong conversion of our RPO into revenue, with expected growth in total revenues of plus 34% in constant currency—surpassing the five-year revenue CAGR included in our long-term outlook. Our fiscal year 2027 gross margin will step down due to the timing of the ramp-up of our data center projects to their full revenue contribution, as well as mix-related impacts.

While these investments are creating near-term pressure on gross margins in our infrastructure business, we expect margin performance in infrastructure to improve rapidly as we reach full contractual revenue levels. Regarding our data center operating costs, we expect them to be slightly negative year-over-year in dollar terms, due to efficiency initiatives driving improved operating leverage.

Net, net, we expect our non-GAAP EPS for the year to be $8.05, up 18% in constant currency, excluding the net one-time investment gains we booked in fiscal year 26 from Ampere and Bloom Energy. I'll finish with guidance for our Q1 2027. In Q1, we'd expect growth in total revenues of between 27% and 29% in U.S. dollars. Of that, we expect growth in cloud revenues of between 58% and 64%.

In non-GAAP EPS, we expect between $1.72 and $1.76, up between 17% and 20% in U.S. dollars. And we participate. Revenues and earnings will accelerate in the second half of the year as we bring further megawatts online at our data centers to fulfill customer demand. I look forward to speaking further with all of you over the next few weeks and months leading into our Q1 and at our next Oracle Investor Day scheduled for October 28th in Las Vegas. With that, I'll turn the call back to Ken for the Q&A.

Ken Bond

Thank you, Hilary. Lisa, if you please poll the audience for any questions they might have.

Operator

Absolutely. And ladies and gentlemen, once again, that is *1. If you have a question, we ask that you limit your questions to one. The first question comes from John Defucci from Guggenheim Securities.

John Defucci

Thank you. So my question is one that I've dealt with throughout this entire quarter—and Clay, that was a ton of information you provided, which is really helpful. But there's one little nuance here. You spent a bit more this quarter on CapEx than we expected, and that’s somewhat the topic of discussion. We know—everyone knows—that component costs have risen significantly, especially memory, which has increased substantially, right?

And even though you mentioned that most Q3 and Q4 contracts are large-scale AI contracts that were prepaid for GPUs, you still have many other contracts. This has been an issue for a lot of software companies and large cloud providers. I don’t think it’s as much of an issue for you, given my understanding of how you structure your contracts. But could you clarify this for investors—specifically regarding these very long-term contracts between you, the end customer, and your suppliers?

Clay Mcgirt

Sure. Yeah, good. Good question, John. Good. Good to talk to you again as always. Look, I'll I'll answer I think that in two parts. In terms of the the capital expenditures, at least from what we're seeing in in Q4, any increase in CapEx that is, is not due to component prices from our perspective that's largely around timing, right? I mean part of my job is to figure out ways to actually accelerate CapEx. You know it, it's Hillary has a tough life. My job is to try to spend the money a little bit faster so I can get ramp revenue sometimes. So, so I don't see that as a as related to component prices.

Now talking about component prices in general, look, I think everyone knows that you know, memory prices have definitely gone up at the Steve prices, hard drive prices, etcetera. So one of the things that we do John, is it's, it's actually quite simple when we're selling stuff at a time period where we have certainty, whether that be certainty because the capacity is already deployed or we have certainty because we have lost prices across the spectrum, whether it be you know space and power costs, energy costs, people costs, component costs.

When we know those costs, we will then do fixed price contracts times that we don't know those costs because it's out too far in the future or we have too much supply chain risk, whether that be due to, you know, just the way the world works or a lack of of things being locked in. We then do not do fixed price contracts with our customers and we have a, a mechanism whereby those costs end up being floated.

So, you know, I, I don't like it when costs go up, Our customers don't like it when costs go up. And honestly, I don't think our suppliers do. I think they'd love to, they'd love to be able to give us everything we want. But when the costs do go up, we have AI think a very robust set of mechanisms that ensure that Oracle is not sitting there with reduced margins.

John Defucci

That is really helpful. It makes a ton of sense. And if I could just a quick one, Hillary kind of alluded to what I'm going to ask, but this is a second question. I get a ton of questions on. You have a, you have long term targets out there. You're a new CFO, right And Congrats. It's great to have you on the on the line. But can you just comment on those large long term targets at all? You know, I've only, I know you've only been there a couple of months.

Hilary Maxson

You know, I think and that would be intention of putting it in the slide. I think that we're reconfirming those long term targets in the in the sense of the cagers that we put into the into the slide today. So we feel comfortable with that and you can see the RPO building to the level that you can start to have a lot of beliefs I think in those long term targets exactly. So full reconfirmation from my side on the long term targets, all very clear.

John Defucci

Thank you very much. Nice job you guys.

Operator

The next question comes from Brad Desalnick, Deutsche Bank.

Brad Desalnick

Great, thank you so much for taking the question. And Hillary, welcome to Oracle. Hillary, as you come to Oracle from a capital-intensive business in another industry, how would you suggest that investors evaluate Oracle's progress and returns during this period of heavy investment?

Hilary Maxson

Yeah, so the way I think about it—and as we said on the earnings call—we feel the returns for the infrastructure business, specifically the CPU and GPU business, are quite strong, probably even from a back-of-the-envelope standpoint. The way I think about return from that business model is in terms of return on invested capital. And what we see is return on invested capital in the high 20s at a steady state—once revenues have ramped up for large projects at the project level—and that doesn’t even factor in potential upsides, like, who knows, maybe GPUs won’t need to be replaced over the long term or things like that.

Just purely in the steady state—when we’ve reached the steady state of the contracts we have—and as we’re generally able to preserve and even improve margins in scenarios like 'bring your own hardware,' the ROIC structures, meaning the return on invested capital for those types of arrangements, will be even higher. And again, that back-of-the-envelope calculation for return on invested capital is after-tax operating margin plus depreciation, divided by gross investment—that is, total gross CapEx at the project level. Maybe that gives you a bit of an idea, and of course, we’re happy to discuss this further over the next few quarters.

Brad Desalnick

That’s really helpful, Hillary. Thank you—and congratulations to the whole team on the execution this quarter. Nice job, everyone.

Hilary Maxson

Thank you.

Operator

Next, we'll take a question from Mark Moersler from Bernstein.

Mark Moersler

Thank you very much for taking my question and also congrats on the quarter. And Hillary, welcome—we're really looking forward to working with you, Clay and Hillary. With so many vendors entering the market to deliver AI data centers, including the Neo clouds, SpaceX, which is now going to build data centers in space, etcetera, where does Oracle see itself in the competitive landscape? And how do you see that increase in capacity impacting your ability to: one, retain customers; two, renew contracts and capture new customers; and three, maintain or improve margins? Thank you.

Clay Mcgirt

Yeah, thanks. Thanks, Mark. Look, I think that first, it's very important that we stay focused on customers. So the nice thing is, whether you look at it from existing RPO or the increased contracts we're getting—yes, there’s a lot happening in the market—but we have a large, diverse set of customers, both very large and smaller ones. And what I spend all my time doing is waking up every day and asking, 'How do I make sure those customers are as happy as possible with us?'

And that’s, you know, when I shared the numbers—for example, in my prepared remarks—about the extremely high utilization rate, even when things come back for renewal, they’re instantly snapped up. Those are all indicators that we have great customer relationships. They’re happy with the products and very satisfied with the prices we’re charging for them.

But I think a lot of people will enter this space. Clearly, even several years in, demand is still massively higher than supply. So I think more and more players will try to figure out how to meet that demand. But I don’t worry about that. I really focus on how we can meet as much of that demand as possible while maintaining a reasonable margin profile.

And that’s what I think you’ve seen us do—innovate new business models to go out and serve customers. In terms of how that affects our future renewals, I find that what largely influences renewals is the relationship we’ll build over the next several years. Fundamentally, we’re in the service business. It’s not like you just buy something and you’re done—it doesn’t work that way, right?

These people are relying on what we do at Oracle to run and maintain these massive clusters every day. And our ability to do that extremely well creates an extremely positive relationship that then ensures that renewals go well. And then in terms of the margin profile, look, you know, I've been at Oracle now for 12 years, the whole time I've been working on OCI. What I can tell you, it's not easy to build an extremely efficient, highly secure, robust cloud.

So I think that our customers see and appreciate the value of what we provide, the flexibility that we give them, the comprehensive set of services that we provide. So and I think that over time, as you know, the market continues to mature and we deploy more and more of our research and development dollars into making things more efficient. I think there's ways that Oracle gets higher and higher margins, but we actually can offer lower and lower prices to our customers.

That's ultimately the job that is on our shoulders. And what we've been doing over the past decade is why the biggest and most robust customers come our way.

Mark Moersler

That's really helpful. I do really appreciate it. Thank you.

Operator

The next question today is Keith Bachman from Bank of Montreal.

Keith Bachman

Yes, thank you very much for the question. Mike, I wanted to direct this to you if I could. You mentioned two things as net new. One was moving towards outcome-based commercial pricing models, the other was rolling out some incremental token packages, and I wanted to see if you could flesh out the 'why'—and more specifically on the commercial, outcome-based pricing models. How do you think this reduces friction, and what modules is this related to? In other words, assuming this is the FAST portfolio, ERP ACM—you know, what models might this relate to? And then finally, how do you think this might impact Brooks? That's it for me. Many thanks.

Mike Cecilia

Sure. Yeah. Thanks for the question, Keith. So, output-based pricing isn't entirely new for us. This is something we've been doing in our construction business based on construction value under management—subcontractors, general contractors, subcontractor cash flows and payments, upsell wheels. As I mentioned in my prepared remarks, with hospitality and even in healthcare, in our new AI-based automated agents where we're automating doctors' notes and lab orders, we’re able to measure and actually price based on patient throughput—which is one of the things providers care about: how many patients can we move through a healthcare system and reduce waiting queues to deliver better service.

What’s happening now is that we’re expanding that offering across our entire fleet, as you mentioned, across all of our applications, including our Fusion fees. Now, the tricky part is if you’re not creating the outcome in the first place—it’s difficult to implement outcome-based pricing. But because we’ve made this full-stack investment and can easily take the best outputs from large language models and deliver them to our customers—paired with both our horizontal and industry-specific applications—we have a very straightforward way to measure outcomes for our customers.

And as I mentioned, one thing we’re increasingly hearing from customers is how much they’re going to spend on AI and how they can get ROI very quickly. So I think we have a very unique advantage given that we’re in the infrastructure business—we host large language model vendors training on our platform, and we also have our entire applications business, spanning both horizontal and vertical segments.

We are naturally generating these outcomes for customers, which really gives us the ability to help them understand their own AI budgets and align those budgets directly to measurable value. So I think this is a unique offering—it relies on the full-stack investment we’ve made. And as I mentioned, it’s still early days, but it’s already resonating very, very strongly with customers. They appreciate the transparency, and they appreciate having outcomes aligned directly to AI spend.

I also mentioned token bundles—if customers want them. Again, much of what we’re doing with our Fusion applications and industry-specific applications continues to be added at no additional charge. If customers want access to advanced reasoning—if they want it—they essentially want more tokens, so we’ve pre-packaged bundles to enable that.

So we’re providing as much flexibility as possible, aligning our pricing models closely with value across our entire application suite. And I expect this will continue to resonate well with customers—as it did during the quarter—and as we roll it out across our entire fleet, it should certainly support our growth story as well.

Keith Bachman

Thanks, Mike.

Operator

Your next question is from Raimo Lenschow from Barclays.

Raimo Lenschow

OK, perfect. And welcome to the team as well. For me, the question I had was we talked a lot about AI and you know it’s growing with great momentum. You’re clearly active there, but you still have the classic Oracle business that we all grew up with. And you know, there’s a lot of noise in the market at the moment, especially on the investor side, about what’s happening to software, etcetera. Can you address a bit what you’re seeing on the database side? You know, there’s OCI, Azure, etcetera. And overall database momentum? And then on the application side, the growth rate slowed down a little bit. But you also mentioned on the call some very nice customer wins. Can you share what you’re seeing? Can you talk about what you see in the applications business? Thank you.

Mike Cecilia

Yeah, sure. It’s Mike. So I’ll take a stab here and then ask Clay to jump in as well. On the applications business, we think double-digit growth in the quarter—on an in-quarter run rate of $4.1 billion—is pretty good. And we’re certainly happy with our continued double-digit growth. As I mentioned, our deferred revenue position in the quarter grew by 16%.

So our deferred revenue is growing faster than our in-quarter revenue, which gives us confidence. You know, regarding the so-called ‘apocalypse’ impact, maybe a couple of quarters ago there were some delayed decision cycles as customers worked through that. But particularly in the mission-critical systems space—where Oracle plays—customers have quickly moved past that and realized that enterprise software, especially when you have AI built into our SaaS solutions, is certainly a very good approach and necessary for modernizing and protecting their businesses.

So I expect our applications business will continue to be a healthy contributor to Oracle, as it has been. As for the database, cloud database revenue grew 29% in the quarter. As I mentioned, our multi-cloud revenue is growing at 4x, and bookings are growing at 3.25x in the quarter. And here’s some really good news on the database front: we’re still in the early innings—very early days—of multi-cloud database adoption. We continue to unlock new regions and establish new partnerships, in some cases even with competitor clouds.

We expect that business to continue being an outsized growth engine for Oracle going forward. And finally, beyond the strong contribution from innovation in the database, I mentioned a couple of features—like deep data security and agent memory—that we’ve embedded into the database. Capabilities such as vector database search and other features we’ve been adding are integral parts of companies’ AI strategies. Data strategy matters. Data architecture matters.

And as the AI market starts to take hold—which, again, is still in its early days—a lot of that data already resides in Oracle databases around the world. We expect to see continued investment and growth in our database businesses, across all facets: multi-cloud, Oracle Cloud, and multi-cloud deployments serving as the foundational support pillar for all our applications and the countless spoke workloads globally running Oracle Database. The prognosis is very good.

Raimo Lenschow

Perfect. Thank you.

Operator

And our last question today comes from Kirk Materne from Evercore ISI.

Kirk Materne

Yeah, thanks very much for taking the question. I had one, maybe sort of a two-part question around Bring Your Own Hardware and prepaid dynamics—maybe for Clay, and then for Hillary. I guess, Clay, for you: about 12% of RPO is now related to these types of deals. When you look at the pipeline, where do you think that split could ultimately go? And when you enter into these types of deals, especially on the Bring Your Own Hardware side, what’s the value differentiation compared to deals that include usage—how do those differ from, say, GPU-type deals? And then, Hillary, just to clarify on the CapEx guide: I think you said $70 billion in CapEx, but that excluded, I believe, $25 billion from some of these prepaid deals. Could you just talk about this dynamic as it relates to your CapEx outlook? Thanks.

Clay Mcgirt

Yeah. So I’ll start and hand it over to Hillary. Look, I mean, I’d love to tell you that we know exactly how things are going to change in the future, but I can’t say that today. The reality is that what’s driving the mix change is an evolving business model, right? You have many different types of accelerators, many different customers, and many different business arrangements.

And so, ultimately, one of the things Oracle can provide to our customers is the ability to deploy upfront capital and then depreciate it over time, helping finance the customer’s usage. But that’s not the only thing we provide—and for many customers, it’s not even the most important offering. What they contract with us for is our ability to go out and get these data centers constructed, properly designed, secured, and equipped with networks inside them; to install a cloud; and to deliver the complementary suite of services around this specific hardware—because it turns out that a set of these accelerators on their own does not constitute a functioning cloud.

You need general-purpose compute and general-purpose storage. You need load balancers, security functions, identity management—you need all of that to actually make this stuff usable. And Oracle provides all of that. Moreover, anyone who thinks these systems are easy to operate is very mistaken. You’re not just buying a single rack and dropping it into your data hall. These are extremely complex clusters that require constant care, feeding, and ongoing maintenance across both the network and the hardware itself.

So when you add all that together, I think what you’re seeing is different market entrants around accelerators helping customers find ways to procure their accelerators, and different customers approaching this in different ways. Therefore, I can’t tell you exactly what the mix will be between Bring Your Own Hardware, prepaid deals, and us providing the capital.

But what I can say is that I think you’ll continue to see innovation and evolution in this model, given the rapid changes happening across this entire ecosystem, Hillary.

Hilary Maxson

So let me just start. We mentioned on the call a couple of times, but we also see the margins in those structures at or better than those in our prior contracts. So that’s good news. In terms of economics, this quarter we introduced this net cash outlay for capital expenditures, which I think is quite important for understanding our funding requirements. Accordingly, for fiscal year 2027, we expect approximately $70 billion in net cash outlay for capital expenditures.

That figure excludes the $20 to $25 billion in repayments we will collect—there are some timing differences embedded there—but these relate solely to third-party manufacturers, not vendors or vendor financing, just third-party manufacturers. So the $20 to $25 billion, when added to the net cash outlay, represents our reported CapEx. But from a funding perspective, what’s happening here is that these structures are enabling us to have a lower cash CapEx requirement as we plan our business.

And also from an economic standpoint, of course, because we’re collecting money upfront. In typical scenarios, we would spend the CapEx amount first and then later collect payments from customers. Here, however, we collect money from customers upfront, so that cash doesn’t fully come out of our own funds to pay for CapEx—or not 100% of it. Therefore, our return on capital will also be somewhat better.

Kirk Materne

Super. Thank you, Hilary, very helpful.

Hilary Maxson

Thank you all.

Ken Bond

Thank you, Hilary. So for next quarter—which is new information for everyone—we expect our Q1 fiscal year 2027 earnings results to be announced on September 10th. Any changes on the day will be publicly disclosed. Also, as a reminder—and Hilary mentioned this earlier—our Investor Day will be held on October 28th in Las Vegas. We look forward to seeing you all there as part of AI World.

A telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. And as a reminder, the slides that you saw today will be posted up to the website shortly. Thank you for joining us today. And with that, I'll turn the call back to Lisa for closing.

Operator

And once again, ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.

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