Oracle achieved a net profit of $17 billion in the last fiscal year, while raising $48 billion through $43 billion in bond issuance and $5 billion in equity financing, aimed at building AI cloud infrastructure for clients such as OpenAI, Meta, and xAI.

As of May 31, the company reported revenues of $67.4 billion, with a backlog of performance obligations rising to $638 billion, approximately 9.5 times the annual revenue; in the fourth fiscal quarter alone, $85 billion was added, mostly from large-scale AI contracts. The management team expects to recognize about 12% of this, approximately $77 billion, in the next 12 months, with another 34% expected over the following two years.

Contracts can be signed in advance, but costs are recognized gradually over several years. GPUs, data centers, and power must be in place before services begin. Capital expenditures for the same fiscal year rose to $55.7 billion, a 162% increase from $21.2 billion the previous year, with free cash flow at negative $23.7 billion. The $48 billion financing bridges the gap between construction expenses and future cloud service fees.

Some large contracts have adopted a new payment structure: clients prepay funds for Oracle to procure GPUs, or purchase chips themselves to provide to Oracle. Prepayments and client-provided hardware have totaled $75 billion, which the company claims reduces the capital it needs to raise. In the fourth fiscal quarter, new AI infrastructure contracts amounted to $67 billion, most of which belong to the aforementioned two categories.

The company plans to refinance approximately $40 billion in the next fiscal year, including a previously announced $20 billion at market price, and expects net cash capital expenditures of about $70 billion; client prepayments and timing differences are estimated at $20 to $25 billion, with on-book capital expenditures likely higher. During the same period, cloud infrastructure revenue grew by 93%, with over 1.2 gigawatts of capacity delivered to clients throughout the year.

In market dynamics, buyers are companies and platforms needing models for training and inference clusters, while the seller is Oracle, transitioning from database software to data center operations; this round of expansion is driven by signed multi-year computing power contracts. Funds flow from bond investors, equity subscribers, and clients prepaying for GPUs into land, power, and cabinets. Beneficiaries are large clients securing capacity and construction chains, while those under pressure must first pay interest and construction costs, then wait for contracts to convert into revenue.

Construction is on schedule, and future cloud service fees may gradually cover debts; delivery delays mean interest and vacant data centers will accumulate before revenue. The company currently aims to turn the signed $638 billion contracts into operational data centers.

Source: Public Information