Beats Sales, Shares Rise

Enterprise software giant Oracle (NYSE:ORCL) reported first-quarter 2026 results that beat the market’s revenue expectations, with revenue up 21.7% year over year to $17.19 billion. The company expects revenue next quarter to be around $19.08 billion, close to analyst estimates. Non-GAAP earnings of $1.79 per share were 5.7% above analyst consensus estimates.

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Gain: $17.19 billion vs. analyst estimates of $16.93 billion (21.7% YoY growth, 1.5% better)
Custom EPS: $1.79 vs. analyst estimates of $1.69 (5.7% better)
Adjusted operating result: $7.38 billion vs. analyst estimates of $7.20 billion (42.9% margin, 2.4% better)
Revenue guidance for the second quarter of 2026 is $19.08 billion in the middle, about in line with what analysts expected
Adjusted EPS guidance for Q2 CY2026 is at $1.98 at the midpoint, above analyst estimates of $1.92
Operating margin: 31.8%, in line with the same quarter last year
Free cash flow amounted to -$24.74 billion, compared to -$9.97 billion in the previous quarter
Invoices: $16.97 billion at the end of the quarter, up 24.1% year over year
Market capitalization: $435.6 billion

Oracle (NYSE:ORCL) started as a database company in 1977 and now delivers mission-critical systems around the world. It provides business software and hardware products and services that help companies manage their information technology needs.

Assessing a company’s long-term sales performance reveals insights into its quality. Any company can achieve short-term success, but a top company grows for years. Over the past five years, Oracle has grown its revenue by 10.1% annually. While this growth is acceptable on an absolute basis, we need to see more than just revenue growth for the software sector, which can exhibit significant earnings volatility. This means that our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Furthermore, the five-year CAGR starts around Covid, when sales fell and then recovered.

Oracle’s quarterly revenue

Long-term growth is the most important thing, but within software, a half-decade historical view can ignore new innovations or demand cycles. Oracle’s annualized revenue growth of 10.5% over the past two years is in line with the five-year trend, suggesting continued weak demand.

This quarter, Oracle reported robust year-over-year revenue growth of 21.7%, and revenue of $17.19 billion exceeded Wall Street estimates by 1.5%. The company’s management is currently targeting a 20% year-over-year revenue increase in the next quarter.

Looking further ahead, sell-side analysts expect revenue to grow by 25.7% over the next twelve months, an improvement on the past two years. This projection is notable for a company of this size and suggests that the newer products and services will deliver better revenue performance.

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In addition to reported revenue, it is useful to analyze RPO, or remaining performance obligations, for Oracle because this shows the value of contracted services to be delivered in the future. It therefore provides insight into future income.

Oracle’s RPO came in at $553 billion in the first quarter, and over the last four quarters, growth has been fantastic, with an average increase of 291% year over year. This alternative revenue metric grew faster than total revenue, which likely means that contracted services that have not yet been delivered are growing faster than services already provided (the revenue recognition criteria). That could be a good sign for future revenue growth.

The customer acquisition cost payback period (CAC) represents the months it takes to recoup the costs of acquiring a new customer. Essentially, this is the breakeven point for sales and marketing investments. A shorter CAC payback period is ideal as it implies a better return on investment and better scalability of the business.

Oracle is extremely efficient at acquiring new customers and the CAC payback period was 0.9 months this quarter. The rapid recovery in customer acquisition costs indicates that the company has a highly differentiated product offering and a strong brand reputation due to its scale. This dynamic gives Oracle more resources to pursue new product initiatives while maintaining the flexibility to increase sales and marketing investments.

We were pleased to see that Oracle exceeded analyst expectations this quarter. We were also pleased that earnings expectations for the next quarter exceeded Wall Street expectations. On the other hand, revenue expectations for the next quarter were in line. Overall, this print had some major positives. The stock rose 8.2% to $162.39 immediately after the results.

Oracle indeed had a very strong quarterly result, but is this share a good investment? We think the latest quarter is just one piece of the longer-term business quality puzzle. Quality, in combination with valuation, can help determine whether the stock is a buy. We cover that in our useful full research report which you can read here. It’s free.