Oracle Phone Conference: Secures $29 billion deal, AI infrastructure "does not consume its own cash flow," "We are the disruptors of SaaS"

On March 10, Oracle held its Q3 FY2026 earnings conference call. Previously, due to market concerns that its future capital expenditure plan of up to $50 billion could trigger a debt crisis, along with the spread of the narrative that “AI will end SaaS,” Oracle’s stock price had sharply retreated from its highs. However, with the latest quarter’s better-than-expected performance (revenue and non-GAAP EPS both up over 20%), its after-hours stock surged more than 8%.

During the call, addressing the three core concerns most worrying Wall Street—debt pressure, the survival of SaaS, and AI business transformation—Oracle’s management provided direct and strong responses.

Leveraging Capital Expenditure and Cash Flow: Decoupling

Faced with the AI wave, cloud giants often find themselves in a dilemma: not investing risks falling behind, while over-investing can strain cash flow and increase debt. Oracle’s solution is—building its infrastructure with other people’s money.

Oracle Cloud Infrastructure (OCI) CEO Clay Magouyrk pointed out that Oracle has secured over 10 gigawatts (GW) of power and data center capacity for the next three years. Notably, more than 90% of this capacity is fully funded by partners.

In addition to having partners fund data centers, Oracle has also reshaped its customer transaction models. Clay revealed that the company recently signed over $29 billion in new contracts through innovative approaches.

“This model, combining customers ‘bringing their own hardware’ (BYOH) and prepayments, allows us to expand without consuming any of Oracle’s free cash flow.” Clay explained.

This strategy directly addresses market pain points. It means Oracle’s remaining performance obligations (RPO) of $553 billion do not need to be fully financed by debt. CFO Doug Kehring reiterated that the company will maintain its investment-grade rating, and the debt issuance scale this year will not exceed the previously announced $50 billion cap.

SaaS Doomsday? “The Disruptor is Ourselves”

Recently, with the evolution of AI auto-programming tools, the market generally worries that emerging AI companies will completely overthrow traditional SaaS giants. Application Business CEO Mike Sicilia countered this.

“I completely disagree with that view.” Mike said, “If we don’t adopt these AI tools, they could indeed be a threat. But the reality is, we are adopting them very rapidly.”

Oracle’s logic is simple: the moat of enterprise SaaS lies in the pull of “mission-critical data.” Oracle is leveraging internal small engineering teams to quickly develop three new customer experience (CX) applications that Salesforce currently does not have, and has embedded thousands of AI agents directly into its existing core backend systems.

“Customers won’t suddenly abandon their core banking, retail sales, or medical record systems to switch to a patchwork AI shell.” Mike pointed out, because Oracle owns the most critical customer data, the AI outputs are the most accurate.

Chairman and CTO Larry Ellison called this evolution “ecosystem automation.” He directly cited an upcoming financial scenario: “In the near future, just tell the AI agent to close the books, and it will automatically complete the process without human involvement.”

Accelerated Delivery Cycles, Stable 32% Gross Margin from Infrastructure

The market is not only concerned about how big Oracle’s infrastructure ambitions are but also how quickly these investments will generate revenue.

This quarter, Oracle’s AI infrastructure revenue grew 243% year-over-year. Behind this rapid growth is a sharp reduction in delivery cycles.

“From rack delivery to revenue generation, it has shortened by 60% in recent months,” OCI CEO Clay Magouyrk revealed. In Q3, Oracle delivered over 400 MW of capacity to customers, with 90% delivered on time or early.

In the early stages of heavy asset investment, profits are often eroded by depreciation and construction costs. But Clay clarified this: the gross margin of AI capacity delivered in Q3 remained at 32%, firmly maintaining the company’s previous guidance of “over 30%.”

Additionally, Oracle’s multi-cloud strategy has fully unlocked sales channels (multi-cloud database revenue surged 531% YoY). This high-margin (60%-80%) database business synergizes with AI infrastructure, further boosting OCI’s overall profitability.

Infrastructure Boom Pressures Current Profits; Additional Funding “Boots” Still Pending

Despite Oracle reassuring the market with its innovative model, risks remain in this capital-intensive AI infrastructure race.

First, the “backlash” from heavy asset expansion on current profits. During the hyper-growth phase, the large number of data centers under construction incurs significant sunk costs.

OCI CEO Clay Magouyrk admitted: “The reason we haven’t achieved higher profitability is because so many projects are underway simultaneously… these costs are not zero.” He acknowledged that these huge construction costs are the most direct current drag on margins.

Second, delivery capacity remains constrained by underlying chip supply. Executives repeatedly mentioned that “demand for GPUs and CPUs for AI infrastructure continues to outstrip supply.” This means that even with $553 billion in RPO, the actual revenue realization is limited by upstream supply chain bottlenecks like NVIDIA and AMD.

Finally, the market’s most feared “dilution risk” has not been fully resolved. Although Oracle recently completed a $30 billion oversubscribed financing, and has committed not to issue additional bonds this calendar year, CFO Doug Kehring explicitly stated at the start: “We have not yet initiated the ‘ATM (At-The-Market, market-based issuance)’ equity financing plan.”

This means that within Oracle’s total $50 billion financing plan, the “boots” of future direct equity issuance to the market are still hanging.

TikTok US Data Business Split, Oracle Holds 15%

During the call, CFO also disclosed a change that could impact non-operating gains and losses: in January, TikTok’s US operations were spun off into an independent company, with Oracle holding 15% equity and gaining a board seat.

Colin stated that this “does not affect” Oracle’s revenue from providing technology services; the equity investment will be accounted for under the equity method, expected to be reflected in the Q4 financials (with a two-month reporting lag), in the line of “non-operating income/loss.”

Full Transcript of the Call:

Oracle FY2026 Q3 Earnings Conference Call

Date: 03/10/2026
Company: Oracle
Event: FY2026 Q3 Earnings Call
Source: Oracle, more info and transcript available

Prepared Remarks

Operator (Regina): Hello everyone, thank you for your patience. I am Regina, the operator for today’s call. Now, I’d like to welcome everyone to Oracle’s FY2026 Q3 earnings conference call. To prevent background noise, all lines are muted. After the speakers’ remarks, we will open for questions. Now, I’ll turn the call over to Ken Bond, Investor Relations. Please go ahead. Thank you.

Ken Bond, IR Head: Thank you, Regina. Good afternoon, everyone, and welcome to Oracle’s FY2026 Q3 earnings call. Attending today are: Chairman and CTO Larry Ellison, Cloud Infrastructure CEO Clay Magouyrk, Applications CEO Mike Sicilia, and CFO Doug Kehring.

You can find the press release and financial statements on our investor relations website, including supplemental financial details for the recent quarter, guidance for future performance, GAAP and non-GAAP reconciliations, and a list of recent Oracle Cloud customers or those already live on Oracle Cloud.

Please note, today’s discussion will include forward-looking statements and important factors that could cause actual results to differ materially. We advise you not to overly rely on these forward-looking statements and to review our latest filings, including Form 10-K and 10-Q, and any updates. We are under no obligation to update these statements with new information or future events.

Before opening for questions, we will have some prepared remarks. Now, I’ll turn it over to Doug.

Doug Kehring, CFO: Thank you, Ken. First, I want to highlight some changes we made to our press release and this call’s format. In the press release, we clearly listed supplemental financial metrics that would normally be provided during the call, so everyone has the information in writing beforehand. My remarks will be brief, then I’ll hand it over to Mike and Clay for more substantive insights. Afterwards, Larry and all of us will answer questions.

For Q3, we had an outstanding quarter, with all metrics exceeding expectations. As emphasized in our press release, our growth momentum continued to accelerate: Q3 was the first quarter in over 15 years where both organic total revenue and organic non-GAAP EPS grew 20% or more in USD.

I’ll briefly mention two points before passing to the CEOs. First, in January, TikTok US completed its spin-off into an independent company, with Oracle holding 15% and a seat on the board. This does not impact revenue from our services as a technology provider. The investment will be accounted for under the equity method, and we expect to recognize our share of earnings from the new company from late January through March 31, with a two-month reporting lag. This will be recorded as non-operating income or loss, providing an incremental boost to our financials.

Second, in February, we announced plans to raise up to $50 billion in debt and equity, and stated that we do not intend to issue any additional bonds in 2026 beyond that amount. Within days, we raised $30 billion through a combination of investment-grade bonds and mandatory convertible preferred stock, with overwhelming demand. As noted in the press release, we have not yet activated the “ATM” equity program.

Lastly, I must remind everyone that despite our increasing scale and complexity, we can still release quarterly results within just 10 days after quarter-end. Using Oracle Fusion, our close and reporting process remains the fastest among any S&P 500 company. This provides us a strategic advantage and helps our Fusion customers achieve similar efficiency. Now, I’ll hand it over to Mike.

Mike Sicilia, Applications CEO: Thank you, Doug. As Doug detailed, we achieved excellent results across the board this quarter, maintaining strong execution. I want to talk about our SaaS business. Oracle offers the fastest-growing, most comprehensive cloud application suite in the market, without question. Our SaaS solutions are the most complete industry platform, highly scalable, reliable, secure, and compliant, trusted by our customers to run their core systems.

At constant currency, cloud applications revenue grew 11% this quarter, reaching an annualized revenue of $16.1 billion. Fusion ERP grew 14%, Fusion SCM 15%, Fusion HCM 15%, Fusion CX 6%, and NetSuite 11%. Industry SaaS solutions for hospitality, construction, retail, banking, dining, local government, and telecom grew 19%. We are very pleased with SaaS growth this quarter.

Against this backdrop, I want to address the widely reported “SaaS doomsday” narrative. Some say that new companies using AI to rapidly code will spell SaaS’s end. I completely disagree. I believe that if we don’t adopt AI tools and their coding capabilities, they could threaten us. But we are adopting them very quickly.

Oracle’s logic is simple: the moat of enterprise SaaS is the “attraction of mission-critical data.” We are leveraging internal small engineering teams to rapidly develop three new CX applications that Salesforce does not yet have, and have embedded thousands of AI agents directly into our existing core backend systems.

“Customers won’t suddenly abandon their core banking, retail, or medical record systems to switch to a patchwork AI shell.” Mike pointed out, because Oracle owns the most critical customer data, the AI outputs are the most accurate.

Chairman and CTO Larry Ellison called this evolution “ecosystem automation.” He cited an upcoming financial scenario: “In the near future, just tell the AI agent to close the books, and it will do so automatically, with no human involved.”

Accelerated Delivery Cycles, Stable 32% Gross Margin from Infrastructure

The market is not only concerned about how large Oracle’s infrastructure ambitions are but also how quickly these investments will translate into revenue.

This quarter, Oracle’s AI infrastructure revenue grew 243% YoY. Behind this is a sharp reduction in delivery cycle times.

“From rack delivery to revenue, it has shortened by 60% in recent months,” OCI CEO Clay Magouyrk revealed. In Q3, Oracle delivered over 400 MW of capacity, with 90% delivered on time or early.

In the early stages of heavy asset investment, profits are often eroded by depreciation and construction costs. But Clay clarified that the gross margin of AI capacity delivered in Q3 remained at 32%, maintaining the company’s previous guidance of “over 30%.”

Additionally, Oracle’s multi-cloud strategy has fully unlocked sales channels (multi-cloud database revenue surged 531% YoY). This high-margin (60%-80%) database business synergizes with AI infrastructure, further boosting OCI’s overall profitability.

Infrastructure Boom Pressures Current Profits; Additional Funding “Boots” Still Pending

Despite Oracle reassuring the market with its innovative model, risks remain in this capital-intensive AI infrastructure race.

First, the “backlash” from heavy asset expansion on current profits. During the hyper-growth phase, many data centers under construction incur significant sunk costs.

OCI CEO Clay Magouyrk admitted: “The reason we haven’t achieved higher profitability is because so many projects are underway simultaneously… these costs are not zero.” He acknowledged that these huge construction costs are the most direct current drag on margins.

Second, delivery capacity remains constrained by underlying chip supply. Executives repeatedly mentioned that “demand for GPUs and CPUs for AI infrastructure continues to outstrip supply.” This means that even with $553 billion in RPO, the actual revenue realization is limited by upstream supply chain bottlenecks like NVIDIA and AMD.

Finally, the most market-worrying “dilution risk” has not been fully resolved. Although Oracle recently completed a $30 billion oversubscribed financing, and has committed not to issue additional bonds this year, CFO Doug Kehring explicitly stated: “We have not yet initiated the ‘ATM’ equity offering.”

This means that within Oracle’s total $50 billion financing plan, the future direct equity issuance “boots” are still hanging.

TikTok US Data Business Split, Oracle Holds 15%

During the call, CFO also disclosed a change that could impact non-operating gains and losses: in January, TikTok’s US operations were spun off into an independent company, with Oracle holding 15% and gaining a board seat.

Colin stated that this “does not affect” Oracle’s revenue from providing technology services; the equity investment will be accounted for under the equity method, expected to be reflected in the Q4 financials (with a two-month reporting lag), in the line of “non-operating income/loss.”