Oracle Shares Slip as Record Bookings Fail to Mask Revenue Miss
The software giant's staggering 438% surge in future contract obligations was overshadowed by a narrow miss on Q2 revenue and weaker-than-expected cloud sales.
Oracle Corp. (NYSE: ORCL) shares fell in after-hours trading Wednesday after the company reported second-quarter financial results that presented a stark contrast between future promise and current performance, leaving investors focused on the latter.
The Austin-based technology giant announced a massive 438% year-over-year increase in its remaining performance obligations (RPO), a key metric for contracted future revenue, which surged to an astounding $523 billion. The figure, fueled by high demand for its AI and cloud infrastructure, far surpassed analyst expectations. However, the record-breaking backlog was not enough to overcome a narrow miss on current revenue.
For the second quarter of fiscal year 2026, Oracle reported total revenue of $16.1 billion, a 14% increase from the prior year but just shy of Wall Street's consensus forecast. The company posted strong profitability, with non-GAAP earnings per share rising 54% to $2.26, beating estimates. Despite the robust earnings, the miss on the top line and underlying weakness in key cloud segments appeared to unnerve the market.
Shares of Oracle, which had closed the regular session with a slight gain, reversed course after the announcement. The negative reaction highlights growing investor anxiety about the lag between signing large-scale AI deals and realizing the revenue from them, a dynamic that raises concerns about near-term growth and the heavy capital expenditures required to build out data center capacity.
According to a report from Bloomberg, the weakness was particularly noted in the company's cloud sales, which have been the focal point of its growth story. This performance fuels fears of a 'delayed payoff,' where the enormous cost of competing with Amazon Web Services, Microsoft Azure, and Google Cloud is felt immediately, while the financial benefits trickle in slowly over the life of multi-year contracts.
In the company's official earnings release, Oracle executives stressed the unprecedented demand for its Oracle Cloud Infrastructure (OCI). "Our RPO is now larger than the GDP of Sweden!" said Oracle CTO Larry Ellison in the statement. "The demand for our Gen2 AI infrastructure is insatiable, and we are signing more large-scale contracts than we can build data centers for."
CEO Safra Catz added, "We are in a phase of hyper-growth, which is temporarily putting pressure on our margins as we build out capacity. But the scale of our contracted business gives us tremendous visibility into our future revenue streams." The official results were detailed in a press release on Oracle's investor relations site.
Analysts are now tasked with balancing the company's enormous pipeline against its immediate execution challenges. While the RPO figure suggests Oracle is a major beneficiary of the enterprise shift to AI, the quarterly revenue miss indicates that converting these bookings into recognized sales is a complex and lengthy process. The Wall Street Journal noted the revenue figure narrowly missed forecasts, a key factor in the stock's decline.
Looking ahead, Oracle provided guidance for its fiscal third quarter that will be scrutinized for signs of accelerating revenue recognition. Investors will be watching closely to see if the company can ramp up its data center capacity quickly and efficiently enough to begin fulfilling its massive backlog, turning the promise of its half-trillion-dollar order book into tangible top-line growth.