☁️ Oracle: The Art of Leverage
Microsoft borrows Anthropic’s best trick
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Big Tech heads to the bond market for AI
Alphabet sold a $31.5 billion global bond deal in February to help fund its AI expansion. Amazon is now targeting at least $37 billion in a new bond sale tied to AI infrastructure.
Oracle, meanwhile, said it plans to raise $45 billion to $50 billion this year through a mix of debt and equity to expand cloud capacity.
What makes Oracle different is the balance-sheet starting point. Alphabet and Amazon are raising debt from a position of financial strength. Oracle is trying to finance its AI buildout while already carrying a reputation as the most leveraged among the major tech platforms.
New reports suggest Oracle is preparing thousands of job cuts and slowing hiring as the cost of that buildout mounts. The debate is now all about how much financial strain Oracle must absorb before that demand turns into durable returns.
Free cash flow flipped to negative $25 billion in the trailing 12 months (TTM), with $11 billion used in Q3 alone. What could possibly go wrong?
ORCL is trading over 50% below its September peak. The stock has always been central to Larry Ellison’s empire. Now it matters even more, because that equity is helping support the family’s massive Warner bet.
Let’s see what we learned this quarter.
Today at a glance:
☁️ Oracle: The Art of Leverage
🤖 Microsoft: Borrowing Anthropic’s Best Trick
1. ☁️ Oracle: The Art of Leverage
Q3 FY26 key metrics:
☁️ Revenue growth accelerated (with a catch): Total revenue reached $17.2 billion, up 22% Y/Y. In constant currency, growth was just 18%, meaning some of the upside came from FX rather than from underlying demand.
📦 Backlog keeps climbing: RPO reached $553 billion, up 325% Y/Y and 6% sequentially. Management also said many new AI contracts require less Oracle funding because customers are prepaying or supplying GPUs directly.
⚡ OCI accelerated again: Oracle Cloud Infrastructure (OCI) revenue grew 84% Y/Y to $4.9 billion, up from 68% last quarter. Total cloud revenue rose 44% to $8.9 billion, while multicloud database revenue surged 531%.
💵 Guidance moved higher: Management reaffirmed FY26 revenue guidance of $67 billion and raised FY27 revenue guidance by $4 billion to $90 billion.
Income statement:
Revenue grew +22% Y/Y to $17.2 billion ($0.3 billion beat).
☁️ Cloud +44% Y/Y to $8.9 billion.
🌐 Software +3% Y/Y to $6.1 billion.
🖥️ Hardware +2% Y/Y to $0.7 billion.
💼 Services +12% Y/Y to $1.4 billion.
The shift to IaaS compressed gross margins to 65% (-6pp Y/Y).
Operating margin was 32% (+1pp Y/Y).
Cash flow:
Operating cash flow TTM was up 13% to $24 billion.
Free cash flow TTM was negative $25 billion and remains under immense pressure due to the CapEx ramp.
Management kept the FY26 capital expenditure outlook intact at $50 billion.
Balance sheet:
Net debt: $114 billion (over 4x net leverage based on $28 billion EBITDA TTM).
