Oracle Earnings Report: Decoding the $138 Billion AI Cloud Backlog

When Oracle announced its fourth-quarter fiscal 2025 results on June 11, 2025, the headlines followed a familiar script: a solid beat on revenue and EPS. The company reported $15.9 billion in revenue, up 11% YoY, and non-GAAP EPS of $1.70, topping analyst expectations and sending Oracle stock up nearly 7% in after-hours trading.

However, there is a deeper story that the headline numbers couldn't tell. To truly understand Oracle's position, we need to look past the surface-level results and decode the powerful signals sent by its underlying metrics like Remaining Performance Obligations, and Cloud infrastructure revenue. Let’s dive to understand where Oracle truly stands.

Oracle’s $138 Billion RPO Anchor

The most telling number in Oracle's entire report wasn't its quarterly revenue; it was its Remaining Performance Obligations (RPO), which represents the total value of contracted, non-cancellable future revenue.

What is RPO?

In simple terms, RPO means the money a company is yet to earn from customers for work it has already signed up to do. Let’s understand with a simple example:

Imagine you're a caterer in Delhi. During the wedding season, you sign contracts with 10 families to cater for their functions in the coming months. Each family pays you an advance and signs a full agreement. Let’s say the total value of these 10 contracts is ₹10 lakh. Out of which:

That ₹8 lakh is your RPO. You have already signed the deal and maybe taken some advance, but you’ll earn the rest only when you actually cater those events.

Similarly, for a tech company like Oracle, If a client signs a ₹1 crore, 3-year software contract, Oracle recognizes only what it has delivered so far (say ₹30 lakh). The remaining ₹70 lakh that will be earned in future quarters is called Remaining Performance Obligations.

Why does RPO matter?

RPO gives investors an idea of how much revenue is locked in and will come in future, assuming the company delivers on its promises. It's a sign of future earnings visibility, like a fully booked calendar for a wedding caterer mentioned in the example above.

Oracle’s RPO surged by an astonishing 41% year-over-year in Q4 to reach $138 billion. To put that figure in perspective, Oracle's total revenue for the entire 2025 fiscal year was $57.4 billion. This means the company has already secured future business equivalent to nearly two and a half years of its current annual revenue. 

Note that this is not a forecast or a hopeful projection; it is revenue that is already contractually obligated. This backlog dwarfs that of many competitors, such as Salesforce, which recently reported a total RPO of $63.4 billion. This strong market commitment signals growing trust in Oracle, driven by large, multi-year deals that reinforce its role as key infrastructure for the AI era.

Oracle Cloud Infra (OCI): The Growth Engine

What’s fueling this unprecedented backlog for Oracle? The answer is the blistering growth of Oracle Cloud Infrastructure (OCI). For years, OCI was seen as a distant challenger to the established cloud hyperscalers. Those days are over. In Q4 alone, OCI revenue grew by 52% to $3 billion. This growth rate stands in stark contrast to the more moderate expansion reported by its larger rivals in their recent quarters.

Source: Oracle, Amazon, Alphabet, Microsoft Q4 Earnings Reports

But the truly eye-opening number is the forecast. Oracle CEO Safra Catz projected that OCI’s growth will accelerate further, to over 70% in FY26. This isn't just growth; it's a statement of intent to aggressively capture market share. The main reason is the huge demand for two key parts of AI: training large language models and running AI-powered apps, which is called inference.

How does Oracle make money from Cloud?

Think of Oracle's cloud business like renting a fully-equipped, state-of-the-art factory instead of building your own. Imagine that you want to open a factory. In the past, you would have to:

• Buy land
• Construct the building
• Set up machinery
• Hire guards, cleaners, and IT staff
• Install electricity, internet, and so on

This is expensive, slow, and risky. Now imagine someone offers you a ready-to-use, fully equipped factory. You pay monthly rent, and everything else like electricity, internet, maintenance, staff, is included. If your business grows, they give you more space instantly. If it shrinks, you downsize. This is what Oracle Cloud offers, but for IT infrastructure.

Instead of buying servers and data centers, companies “rent” computing power, storage, and Oracle’s software via the cloud. Oracle manages everything, security, updates, speed, data backups, so businesses can just log in and get to work.

Oracle earns money when companies:

• Pay for storage, computing, and data processing (like rent and utilities)
• Subscribe to cloud-based apps, like Oracle’s HR or finance software
• Buy technical support and extra services, like advanced security or data analytics

So instead of investing crores into IT infrastructure, companies pay Oracle monthly or yearly, just like rent, and let Oracle handle the heavy lifting.

Oracle lays a Hybrid Foundation

While cloud grabs the spotlight, Oracle’s traditional on-premise business remains surprisingly strong. In a time when many legacy players are seeing this segment decline, Oracle’s cloud and on-premise license revenue grew 8% in Q4.

It reflects a hybrid reality, especially in highly regulated sectors. Many of Oracle’s biggest clients are moving to the cloud at their own pace, using a "Bring-Your-Own-License" model that builds on existing investments. In contrast, IBM’s infrastructure revenue fell 4% in the same quarter.

Oracle’s steady on-premise business gives it a loyal customer base and a stable foundation to grow OCI. Backed by its core enterprise software, which runs payroll, billing, supply chains, and customer records for global giants, Oracle is using this deep, mission-critical presence to pull customers into its cloud ecosystem.

Oracle’s Profitable Growth and a Cash-Generating Machine

What stands out in Oracle’s transformation is that rapid growth hasn’t come at the cost of profitability. In Q4, the company posted a non-GAAP operating margin of 44%, highlighting strong financial discipline.

For the full year, Oracle generated $20.8 billion in operating cash flow, up 12% from the previous year. This gives it the fuel to expand global data centers, meet rising demand (seen in its $138 billion in RPO), and still return value to shareholders.

Oracle's Q4 isn’t just about an earnings beat as it marks a shift in narrative. This is no longer a company trying to catch up in cloud; it's becoming a leader in AI-era infrastructure, with OCI growth forecast above 70%. The numbers reflect it, the world’s biggest companies are betting on Oracle to power their AI future.

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