Oracle Q1 Takeaways For The Channel

A shocking revenue forecast, AI replacing humans and SaaS sales are among the big takeaways from Oracle’s first-quarter earnings report.

Oracle rocked Wall Street on Tuesday with monster revenue projections for the next four years thanks to the growing market for artificial intelligence inferencing—but the database and cloud products vendor’s forecast and latest quarterly performance offer the channel some wider takeaways on the state of enterprise AI.

The Austin, Texas-based vendor’s reveal on Tuesday that it has $455 billion in backlog and expects to exceed $500 billion in remaining performance obligations (RPO) over the next few months helped send its stock up more than 40 percent as of Wednesday morning, with Oracle trading at about $341 a share.

Bloomberg declared Oracle co-founder and CTO Larry Ellison the richest man in the world for the first time with a $393 billion fortune, dethroning Elon Musk of Tesla, whose wealth was $385 billion. Ellison’s $101 billion growth in wealth was the biggest one-day increase ever recorded by the Bloomberg Billionaires Index.

All of that is great for Oracle and its shareholders, but what the company’s executives discussed on Tuesday’s call should still resonate with channel partners.

[RELATED: What Salesforce’s Q2 Says About Enterprise Software In The AI Era]

Oracle First Quarter

Oracle may have more details on what it sees in the market at its AI World event being held from Oct. 13 to Oct. 16 in Las Vegas. But for now, continued questions around the role of Software as a Service in an AI world and Oracle apparently replacing humans with AI are among the biggest takeaways from Tuesday’s quarterly earnings call outside the vendor’s forecasts.

Here’s more of what solution providers can take away from Oracle’s first-quarter results and eye-popping projections.

Breaking Down That Revenue Forecast

Oracle’s RPO came in fourfold year over year and more than tripled quarter on quarter, growing by $317 billion. It fueled revised revenue expectations for its Oracle Cloud Infrastructure (OCI) to 77 percent growth year on year to $18 billion for fiscal year 2026.

The vendor added that it expects revenue to hit $32 billion the following year, up 78 percent year on year. It should hit $73 billion the year after, more than double year on year. Then $114 billion the year after, up 56 percent year on year. And then $144 billion in the 2030 fiscal year, up 26 percent year on year. Most of the increased expectations are in Oracle’s backlog, CEO Safra Catz (pictured) said on the call.

Oracle should see about 10 percent of the $455 billion backlog over the next 12 months, Morgan Stanley said in its Wednesday report. That current RPO (cRPO) of $45.5 billion is up 21 percent year on year but flat quarter on quarter.

The AI application industry should hit $155 billion by 2030, Bank of America said in a report Wednesday.

As KeyBanc noted in its Wednesday report detailing the magnitude of the news, Oracle spent the last three months adding $300 billion in future contracted revenue to its business. It does about $60 billion in revenue in a year.

“The questions around whether customers will come or not has probably been put to bed,” according to the investment firm’s report. “The growth is real and, now, contractually identifiable. … The lengths of the deals are longer than the typical three- to five-year enterprise software deals we usually see; we believe some are 10 years in length, which aids total RPO more than it will RPO within the next 12-36 months.”

Oracle’s pending revenue comes mostly from contracts secured with OpenAI, Facebook parent Meta and Elon Musk’s xAI. But additional large, noncancelable upcoming cloud deals should push RPO past $500 billion by the end of the year, William Blair said in a report Wednesday. The numbers show multiyear cloud contracts are needed to satiate AI training and inference demand.

Melius Research added in its Wednesday report that Oracle has finally started counting contributions from the $500 billion Stargate venture it is part of with Microsoft-backed ChatGPT creator OpenAI and investment giant Softbank.

The State Of SaaS

Amid all the excitement over Oracle’s forecast, partners should still note that the vendor missed on revenue expectations by about $100 million, coming in at $14.9 billion.

Oracle’s back-office SaaS business grew 16 percent year on year, down 4 percentage points from the prior quarter, according to William Blair’s Wednesday report.

The state of SaaS in a world dominated by AI agents has been a recurring topic on enterprise application vendor earnings calls, with Oracle rival Salesforce notably defending the business model earlier this month.

SaaS faces threats of replacement by AI allowing users to make their own versions of proprietary software, fewer seats and licenses needed when agents instead of humans are the accessors of the software and a lack of future pricing power, Melius Research said in its Wednesday report on Oracle.

“In the once mighty Software realm, Microsoft and Oracle really aren’t software companies anymore—they are AI cloud infrastructure stocks that happen to sell software,” according to the investment firm. “Google may soon be a cloud infrastructure stock that happens to sell Search.”

OCI should make up the majority of Oracle’s revenue by its 2028 fiscal year, according to KeyBanc’s Wednesday report.

Morgan Stanley put it bluntly that in regard to Oracle’s missed metrics, “none of that matters.” In the investment firm’s Wednesday report, it said Oracle’s fundamental business is shifting to GPU data center operator, calling the first-quarter backlog “the biggest bookings number we've ever seen in software.”

Based on Oracle’s projections, total revenue will grow at a 31 percent compound annual growth rate through Fiscal Year 2029 to $169 billion. OCI at $114 billion represents 68 percent of the revenue and GPU as a Service represents 57 percent of the total revenue at $96 billion, according to Morgan Stanley’s report.

Cloud, Database Still Big Business

Vendors and solution providers alike have pointed to AI excitement translating into renewed interest in cloud migrations to get the most out of AI insight from company data and work around data cleaning, governance and harmonizing.

Oracle’s cloud revenue grew 6 percent quarter on quarter and OCI consumption growth accelerated to 67 percent, William Blair said in its report. Oracle still maintains its 16 percent revenue growth for fiscal year 2026 to $66.5 billion—with 34 percent total cloud growth and 77 percent OCI growth to $18 billion.

Its database business grew in part from Oracle running in Amazon Web Services, Microsoft Azure and Google Cloud Platform. That multi-cloud deployment business grew more than 16 times year on year.

Oracle’s database and app reputation could help amplify its AI business as a one-stop-shop offer for enterprises, Bank of America said in its Wednesday report.

Morgan Stanley added that cloud Database as a Service exited the quarter at about $2.8 billion in annual recurring revenue, up 32 percent year on year. That is an acceleration from 31 percent growth the prior quarter.

SaaS, on the other hand, came in at about $3.8 billion, up 10 percent year on year ignoring foreign exchange, below Wall Street’s expectation of closer to $3.9 billion. Infrastructure as a Service came in at $3.3 billion, up 54 percent year on year ignoring foreign exchange, below Wall Street expectations of closer to $3.4 billion.

Oracle’s Autonomous Database revenue grew 43 percent year on year, a deceleration from the 47 percent reported the prior fiscal year, according to the investment firm’s report.

A Better Data Center Approach?

Oracle showed that it can handle the growing demand in terms of capital expenditures, only raising its expected fiscal year 2026 CapEx by $10 billion to $35 billion in total, up 65 percent year on year. It reported $8.5 billion in CapEx for the first fiscal quarter, higher than Wall Street expected.

Part of Oracle’s differentiators in the data center compared with competitors is relying on leases and colocating in other cloud data centers, William Blair said in its report Wednesday. Most of its CapEx is in GPUs, servers, networking and short-term assets.

The news is also good for companies including Nvidia, Arista Networks, Broadcom, AMD and other suppliers of the components needed for AI, multiple investment firms pointed out.

“I know some of our competitors, they like to own buildings,” Oracle CEO Catz said on Tuesday’s call. “That’s not really our specialty. Our specialty is the unique technology, the unique networking, the storage, just the whole way we put these systems together.”

The data center build-up—Oracle is working on 37 new data centers for Microsoft, Google and Amazon to bring that total to 71—is hurting its free cash flow, according to Melius Research’s Wednesday report. But the firm described the trend as a nonissue “for now.”

Oracle may need to raise around $25 billion in debt in each of the next four years to keep up with demand, according to KeyBanc’s Wednesday report, though the firm did not cast doubt on the vendor’s future performance making up for those costs.

Oracle’s engineering-first approach and competence in building high-performance software and hardware bought it credibility for its promise to deliver lower-cost AI compute in Bank of America’s Wednesday report.

“The sustainability of Oracle’s long-term competitive moat in the AI infrastructure industry is unclear at this point,” the investment firm said. “However, the company’s history as a leading software platform should translate to building value added managed services for AI workloads over time.”

AI Replacing Head Count

Watchers of the big technology companies have been eyeing the large volumes of layoffs for signs of whether these are just resource allocations to better parts of the business, or whether AI is actually replacing human employees.

Ellison told listeners on Tuesday’s call that Oracle has leveraged AI to build new applications and no longer needs the same number of employees. The promise of AI to decrease overhead gives it staying power for enterprises.

“The latest applications that we are building, we’re not building them,” he said. “They’re being generated by AI. And we think we’re far, far ahead of any of the other application companies.”

The Oracle co-founder said that this also results in better pricing for its customers because it doesn’t charge separately for AI and applications.

“Our applications are AI,” he said. “They’re entirely AI. The new ones—the new ones that we’re building—they’re nothing other than a bunch of AI agents that we generate, that are linked together with Workflow [Oracle’s business process automation management system]. That’s all they are.”