Oracle Makes Customers Fund Its AI Expansion Upfront

12.09.2026

5 min read

Oracle released its results for the first quarter of fiscal 2027 on 10 September 2026. The company generated around 17 billion euros in revenue and spent around 24 billion euros on data centers that quarter. Many customers commit before knowing whether they will renew or exit after three years, as their prepayments help fund the expansion.

Key takeaways

Oracle reports around 17 billion euros in first-quarter revenue. Cloud infrastructure drives growth, while software revenue falls as customers move to the cloud.
New AI cloud contracts worth more than 25 billion euros leave Oracle’s capital plan unchanged, the company says. Customers typically fund the expansion through prepayments or their own hardware.
Chief Financial Officer Hilary Maxson says around half the backlog should become revenue within 36 months. After that, the contract determines renewal or exit.
Oracle has delivered 850 megawatts of additional data center capacity and more than 300,000 graphics processors. Most are in Abilene, Texas; Oracle names no European locations.

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Oracle Reports 17 Billion Euros in Quarterly Revenue

In its quarterly release dated 10 September 2026, Oracle reports around 17 billion euros in revenue and calls it a record quarter. Revenue rose 30 percent, driven mainly by cloud infrastructure rather than licenses.

Customers rent computing power in the cloud and spend less on software in their own data centers.

Cloud Infrastructure Grows 121 Percent

Cloud infrastructure generated around 6.4 billion euros in revenue, up 121 percent. Cloud applications grew just ten percent over the same period.

Category	Amount	Change
Total revenue	around 17 billion euros	up 30 percent
Total cloud	around 10 billion euros	up 62 percent
Cloud infrastructure	around 6.4 billion euros	up 121 percent
Cloud applications	around 3.6 billion euros	up 10 percent
Software	around 4.7 billion euros	down 3 percent

Source: Oracle press release, 10 September 2026. Euro amounts converted using the European Central Bank reference rate of 11 September 2026 and rounded.

Software revenue was around 4.7 billion euros, down 3 percent. Oracle attributes the decline to customers migrating on-premises software to the cloud. On-premises means software in the customer’s own data center.

The decline does not reflect customers leaving. They will pay for the same software through cloud subscriptions rather than licenses. The three-percent decline is therefore smaller than it appears in the table.

around 570 billion euros

Backlog (Remaining Performance Obligations), around 180 billion euros more than a year ago

Oracle press release, 10 September 2026

Who Pays for 850 Megawatts of Data Centers?

Since the end of the previous quarter, Oracle has delivered 850 megawatts of additional data center capacity to customers, with more than 300,000 graphics processors, the chips that run large AI models. On the earnings call, co-CEO Clay Magouyrk said most of this capacity is on the Abilene campus in Texas, where 618 megawatts have been delivered across six of eight buildings. Further sites are being developed in New Mexico and Wisconsin.

Free cash flow was around minus 4.3 billion euros for the quarter. This measures cash remaining after capital expenditure. The expansion therefore consumes more cash than day-to-day operations generated that quarter.

Operating cash flow rose 184 percent to around 20 billion euros. Oracle generates cash from day-to-day operations and invests it in data centers and graphics processors. How much additional capital Oracle must raise depends on the gap between these two figures. Rating agency S&P consequently downgraded Oracle to BBB-, one notch above junk, on 9 July 2026.

First-quarter capital expenditure was around 24 billion euros. After customer prepayments, around 15 billion euros remained for Oracle to finance itself, according to Maxson. Customers thus covered around a third of the financing during the quarter.

Most New Contracts Rely on Prepayments

Oracle signed new AI cloud contracts worth more than 25 billion euros during the quarter. Their structure means they have no additional impact on capital-raising plans, the company said in its release. The existing financing plan therefore stands; Oracle does not rule out raising further capital.

According to Reuters, Chief Financial Officer Hilary Maxson says the vast majority of new orders use prepayments, bring-your-own-hardware or a similar mechanism. Bring-your-own-hardware means customers buy the equipment themselves and install it in an Oracle data center. Oracle therefore needs no additional capital for these orders.

Oracle also sold new common shares on the stock market through an ongoing program, raising around 17 billion euros before commissions. That amount is comparable to quarterly revenue and shows that the expansion still needs fresh equity alongside prepayments.

The contract commits customers before capacity is operational. Those reserving capacity often bear the initial capital risk. Under this arrangement, Oracle sells computing time and funds expansion through the customer. For procurement teams, this becomes a credit question: customers funding capacity upfront are effectively lending to the provider and must check the terms for delays or default.

After 36 Months, Exit Terms Matter

Remaining Performance Obligations, meaning booked contracts that have yet to be billed, stood at around 570 billion euros. They rose by around 180 billion euros year on year. Oracle’s backlog thus represents several years of revenue.

Maxson said on the earnings call that around half this backlog should become revenue within the next 36 months. After that period, customers face renewal or exit.

Oracle named no European locations for the new capacity. Customers with data residency requirements therefore still do not know where their cluster will run.

What Remains Unresolved in the Contract After the Quarter

Oracle projects second-quarter revenue growth of 30 to 34 percent. Its annual revenue target remains at least 77 billion euros. The next quarterly results will show whether prepayments and customer-owned hardware can support that target without expanding the existing capital plan.

What is a remaining performance obligation? Remaining Performance Obligations are booked contracts that have yet to be billed. Oracle reports around 570 billion euros in these obligations.

Frequently Asked Questions

Do the quarterly results mean Oracle needs no further financing?

Oracle says only that the new AI cloud contracts cause no additional change to its existing capital plan. The company raised around 17 billion euros before commissions through its ongoing share-sale program. Rating agency S&P downgraded Oracle in July over cash flow and business risk.

Who pays for the graphics processors before the cluster is running?

According to Reuters, Chief Financial Officer Hilary Maxson says most new orders use prepayments, bring-your-own-hardware or a similar mechanism. Capital expenditure was around 24 billion euros for the quarter. After customer prepayments, around 15 billion euros remained for Oracle to cover, Maxson said. Oracle gives no per-user price for these contracts.

What remains uncertain for customers after 36 months?

Around half the backlog should become revenue within 36 months, according to Maxson. The individual contract sets out subsequent renewal and exit terms; the quarterly release does not. Oracle also named no locations outside the US for the 850 megawatts.