0001193125-26-101045
SEC filingOracle's Q3 FY26 revenue grew 22% YoY driven by cloud infrastructure growth, operating margin improved to 32%.
In Q3 FY26 (three months ended February 28, 2026), Oracle's total revenue reached $17.19B, a 22% increase reported (18% constant currency) from $14.13B in Q3 FY25. The growth was primarily driven by the cloud and software segment, which contributed $15.03B (+24%). Operating income rose to $5.46B (32% margin) from $4.36B (31% margin), a 25% increase. The operating margin expansion of 100 bps was supported by revenue growth outpacing operating expense growth (20% vs 22%). Key expense drivers included a 70% surge in cloud and software costs due to infrastructure investments, partially offset by lower amortization (-25%) and sales & marketing (-4%). Net income is not explicitly disclosed in MD&A, but inferred from operating income, interest expense, non-operating income, and taxes suggests ~$3.7B for the quarter.
The cloud and software segment (88% of total revenue) saw cloud infrastructure revenue skyrocket 84% to $4.89B, while cloud applications grew 13% to $4.03B. Software support rose 4% to $4.97B, and software license inched up 2% to $1.15B. However, segment margin fell to 58% from 63% due to a 70% increase in cloud and software expenses, primarily infrastructure costs. The hardware segment reported modest revenue growth of 2% to $714M, but margin improved from 64% to 68% due to cost reductions. Services revenue grew 12% to $1.44B, with margin jumping from 20% to 28% on higher consulting revenues and lower employee-related costs.
Management expects total cloud and software revenues to continue increasing on a constant currency basis, driven by cloud growth and sustained software demand. Cloud proportion is expected to keep rising. However, cloud and software expenses and capital expenditures are expected to grow as Oracle expands data center capacity. The company highlighted the 2026 Restructuring Plan aimed at improving efficiencies, with related costs of $153M in the quarter. No specific quantitative guidance was provided, but the significant increase in remaining performance obligations ($552.6B vs $130.2B a year ago) signals strong future revenue visibility from large cloud contracts. Free cash flow turned deeply negative (-$24.7B trailing) due to record capital expenditures ($39.2B YTD), reflecting aggressive data center buildout.
Cash and cash equivalents surged to $38.5B from $10.8B at May 31, 2025, driven by massive debt issuance ($43B senior notes) and proceeds from mandatory convertible preferred stock ($5.0B). Total debt increased to $134.6B from $92.6B. The company also established a new $10.0B revolving credit facility (unused) and increased its commercial paper program to $10.0B ($3.8B outstanding). Marketable securities remained modest at $0.7B.
Remaining performance obligations (RPO) reached $552.6B, with 12% expected within 12 months. Off-balance-sheet commitments are substantial: $261B in additional data center leases (expected to commence through fiscal 2028, terms 15-19 years) and $11B in unconditional purchase obligations (primarily power). Additionally, $2.2B of lessor borrowing is guaranteed. Operating lease liabilities on balance sheet total $21.3B, finance leases $6.3B.
Buybacks remain modest: $93M for 0.4M shares in 9 months, with $6.3B remaining authorization. A new $20B ATM program was authorized but unused. Dividends increased 25% to $0.50 per share quarterly; total dividends paid $4.3B. Capex exploded to $39.2B (81.3% of sales) from $12.1B a year ago, reflecting aggressive data center buildout. Debt issuance provided the primary funding.
Segment margins (direct controllable costs only): Cloud & Software 58.8% (9mo) vs 63.0% a year ago (decline due to infrastructure investment), Hardware 66.9% (down from 66.5%), Services 25.5% (down from 18.3%). Revenue growth driven by Cloud Infrastructure (+84% in 9mo) and Cloud Applications (+12%). Geographic mix: Americas 65%, EMEA 23%, Asia Pacific 11%.
The provided document excerpt lacks the full cash flow statement. However, two significant cash flows are identified: (1) Investing cash inflow of $4,300 million from the sale of Ampere Computing Holdings LLC, which also generated a realized gain of $2,700 million recorded in non-operating income. (2) Operating cash inflows from sales of financing receivables of $1,400 million during the nine months ended February 28, 2026. Without the complete statement, we cannot assess total CFO, capex intensity, free cash flow, or capital returns. The $4.3B Ampere sale is a one-time event, likely distorting investing cash flow. The financing receivables sales are recurring but not specified as part of operating cash flow in the note. Further analysis requires the official cash flow statement table.