Date: 2026-03-11 | WSM
This was a very good quarter, better than I expected, and the key point is that Oracle is starting to look like a real AI infrastructure revenue conversion story, not just an AI capex story.
I still would not call it a top-tier WSM name because the capital intensity, leverage, and lower-quality legacy mix make it less clean than NVDA/CRDO/AXON. But the quarter was decisively bullish.
| Metric | Q2 FY26 | Q3 FY26 | Read |
|---|---|---|---|
| Revenue | $16.06B | $17.19B | +22% YoY, about +7% QoQ |
| Non-GAAP EPS | -- | $1.79 | Beat |
| Total Cloud Revenue | ~$7.97B | $8.90B | +44% YoY |
| OCI / IaaS | ~$4.10B | $4.90B | +84% YoY, +19.5% QoQ |
| SaaS / Cloud Apps | ~$3.87B | $4.00B | +13% YoY |
| RPO | $523B | $553B | +325% YoY, +$29B QoQ |
| GAAP Op Margin | -- | 32% | Solid, not elite |
| Non-GAAP Op Margin | -- | 43% | Down slightly YoY |
| Q4 Revenue Guide | -- | +19% to +21% YoY | Strong follow-through |
| Q4 Cloud Guide | -- | +46% to +50% YoY | Very strong |
| FY26 Revenue Guide | -- | $67B | Held |
| FY27 Revenue Guide | prior lower | $90B | Raised |
| FY26 CapEx Guide | -- | $50B | Huge |
OCI at +84% YoY is the number. Not the legacy database business. Not the applications. OCI.
And sequentially, +19.5% QoQ at this scale is real acceleration. That says backlog is converting.
$553B RPO, up 325% YoY. Eish!! That is not normal.
Now, I do want to be careful here: backlog is not revenue, and Oracle has a history of investors getting excited about future promises. But when OCI is also accelerating, the RPO matters much more. The leading indicator is finally lining up with current revenue.
The fear was: Oracle is levering up and spending wildly on AI infrastructure without enough demand visibility.
This quarter answered that in three ways:
That last point matters a lot. It makes the capex look less reckless.
The problem is obvious:
So this is not AXON. It is not CRDO. It is not even NVDA in terms of quality. It is a more complex story.
| Topic | Commentary | My Read |
|---|---|---|
| AI infrastructure demand | Capacity coming online over 3 years, mostly partner-funded | Bullish if true; lowers funding risk |
| Multicloud traction | 33 Microsoft, 14 Google, 8 AWS regions live; more coming | Strengthens Oracle's role as neutral AI/data layer |
| AI infra margin | Q3 delivered AI capacity at ~32% gross margin, above 30% guide | Better than feared |
| AI in software | Ellison/Sicilia argued Oracle benefits from AI rather than gets disrupted by it | Narrative helpful, but OCI numbers matter more |
| Lens | Assessment |
|---|---|
| Revenue trajectory | Improving |
| Leading indicators | Very strong -- RPO, multicloud, AI demand |
| Margins | Good enough, not exceptional |
| FCF | Weak because of capex |
| Simplicity | Middling -- too many moving parts |
| Management credibility this quarter | Improved |
| Thesis | Intact-to-strengthening post print |
I like the quarter. Much more than the stock historically deserved from me.
Would I buy ORCL over NVDA, CRDO, AXON or even FIGR here? No.
Would I dismiss ORCL as an old legacy company missing AI? Also no. That would be a mistake after this print.
The correct conclusion is: Oracle is executing far better than the market expected, and the OCI/RPO combination is now too strong to ignore. But for me it still sits in the "good company, not best idea" bucket because of capex intensity and business complexity.
If OCI drops back toward 50-60% growth while capex stays enormous, I would get cautious quickly. If OCI can hold high growth and backlog keeps converting, then the rerating can continue.
-wsm