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$Oracle(ORCL)$ $NVIDIA(NVDA)$ $Taiwan Semiconductor Manufacturing(TSM)$ 🔥📊🚀 Oracle Earnings Breakdown, RPO Erupts to $523B, AI Infrastructure Surges, Cash Burn Deepens 🚀📊🔥

Market Structure and Technical Overview

Oracle completed a full rotational cycle. Gold tops at $228.50 to $233.80 retraced into gold bottoms at $197.80 to $191.56 which is a structurally clean revisit of the earlier all time high breakout zone. The level is still holding. Technically this remains a healthy retest and not a breakdown. The next directional confirmation will come from whether $ORCL reclaims the mid band.

Headline Results and Earnings Quality

Q2 FY26 delivered headline strength. Adjusted EPS printed $2.26. Revenue reached $16.06B. Cloud revenue accelerated to $8B driven by 68% IaaS expansion. Net income reached $6.14B. RPO surged to $523B which is up 438% year on year and 15% quarter on quarter.

The distortion sits beneath the surface. A $2.7B pre tax gain from the Ampere asset sale inflated profitability. Roughly 40% of Non GAAP net income was non recurring. True operational EPS growth is materially lower once this item is removed.

Bull Case

IaaS revenue grew 68% which confirms that Oracle is taking share in AI training workloads from hyperscalers. Growth has accelerated for four consecutive quarters. RPO at $523B is unprecedented. Sequential RPO growth of $68B signals massive multiyear demand. Meta, NVIDIA, Uber, Temu and others continue to commit to long term capacity. Multi cloud adoption is accelerating with Oracle Database revenue across AWS, Azure and Google Cloud up 817% year on year. The strategy is working at scale. Cloud Application revenue remains steady with Fusion ERP up 18% and NetSuite up 13%.

Bear Case

The earnings beat lacked quality. The Ampere gain inflated operational optics and masks margin pressure. Trailing twelve month free cash flow collapsed from $9.5B to negative $13.2B due to heavy CapEx now at $35.5B. This is the most significant risk. The AI buildout is capital heavy and front loaded. Margins remain under pressure. Non GAAP operating margin of 42% is down from 43% as infrastructure spending absorbs scale benefits.

Themes

Cloud Infrastructure acceleration continues. IaaS is now annualising above $16B with structural momentum that exceeds AWS and Azure on a rate of change basis. Multi cloud adoption is the largest unlock. Dedicated Region and Alloy consumption increased 69% and OCI Marketplace consumption increased 89%. Oracle is building seventy two multi cloud datacentres which removes historical friction around lock in. Cloud applications remain stable compounders. Cloud app deferred revenue grew 14% which is a forward signal of acceleration.

Detailed KPIs

Total revenue grew 14% in USD which is faster than Q1 and Q4. Hardware revenue of $776M grew 7% but remains a low margin segment. Operating margin at 42% shows mild compression as Oracle absorbs infrastructure scaling costs.

Infrastructure Delivery and Capacity Highlights

Oracle delivered nearly 400MW of data centre capacity in the quarter. GPU deployment increased 50% sequentially. The Abilene supercluster is progressing with more than 96,000 NVIDIA GB200 GPUs. AMD MI355 deployments began during the quarter. Uber scaled above 3M cores on OCI. Temu reached nearly 1M cores during BFCM. These are hyperscale customer volumes that validate Oracle’s AI infrastructure position.

Healthcare and Applications

Healthcare continues to expand with 274 customers live on the clinical AI agent. Oracle’s new AI based ambulatory EHR achieved regulatory approval. There were 330 cloud application go lives this quarter. This supports diversification away from pure infrastructure.

Financial Guidance and RPO Timing

Management increased FY26 CapEx guidance by roughly $15B relative to Q1. Q3 revenue growth is expected at 19% to 21% in USD with Non GAAP EPS of $1.70 to $1.74. Currency tailwinds are forecast to add 2% to 3% revenue and $0.06 EPS. Approximately $4B of new RPO from Q2 is expected to convert in FY27.

Capital Structure and Funding Models

Management directly refuted analyst projections suggesting $100B in capital raises would be needed. Actual capital requirements are substantially lower due to customers supplying their own GPUs and suppliers leasing chips instead of selling them upfront. Data centre lease payments do not begin until a facility is fully delivered and operational which significantly improves cash timing.

Margin Profile and Ramp Dynamics

Management clarified that new AI datacentres reach the 30% to 40% gross margin target within a couple of months of going live because expenses are synchronised with revenue generation. This creates a steep margin ramp once clusters activate.

My Verdict

The bull case is anchored by 68% IaaS growth, multi cloud scale, and a $523B RPO engine that provides unmatched forward visibility. The bear case is defined by negative free cash flow, margin compression, and heavy capital intensity. The setup carries enormous upside with equally significant execution requirements.

Key Question

Given that capital needs are now expected to be materially lower than the $100B previously modelled, what annual RPO conversion rate is required to stabilise free cash flow and maintain margin trajectory while supporting hyperscale AI infrastructure expansion.

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