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Oracle (ORCL -6%) is lower following its Q3 (Feb) report last night. ORCL reported a slight EPS miss. This was its third miss in the past four quarters relative to consensus, although EPS was within guidance, albeit on the lower end. Revenue rose 6.4% yr/yr to $14.13 bln, which was a bit light. Oracle also provided downside guidance for Q4 (May). We did not get a lot of color on the call, but Oracle did mention some one-time tax events and FX has been an issue lately.

• There were definitely some positives as well. Oracle announced a 25% increase to its quarterly dividend to $0.50/sh which computes as roughly a 1.4% yield. And probably the most promising aspect was Oracle's bullishness on FY26 and FY27. While not providing formal guidance, Oracle said its confidence in meeting its $66 bln revenue target for FY26 is now stronger than ever and represents 15% growth. More importantly, Oracle raised its FY27 sales growth outlook to around 20%.
• Oracle was bullish on its infrastructure cloud services, which now sports annualized revenue of $10.6 bln. OCI consumption revenue was up 57% as demand continues to dramatically outstrip supply. Also, Oracle now expects that the component delays that have slowed cloud capacity expansion this year should ease in Q1 (Aug) FY26. Oracle described growth in the AI segment of its infrastructure business as extraordinary. GPU consumption revenue is now nearly 3.5x last year's.
• RPO was a standout metric in Q3. This was Oracle's strongest booking quarter ever by a huge margin as it added $48 bln to its backlog. Its RPO balance is now $130 bln, up from $97 bln last quarter and $80 bln last year (+63%). And this does not include any contracts with Project Stargate. Oracle sees RPO as the leading indicator of demand for its cloud services, while its live data center count and power capacity is the leading indicator of the conversion of RPO to revenue.
• Growing its power capacity is critical in terms of expanding its data centers. Oracle expects that its available power capacity will double this calendar year and triple by the end of next fiscal year. As Oracle brings more capacity online, revenue will clearly accelerate. Oracle says it's the destination of choice for both AI training and inferencing because its Gen 2 cloud is faster and, therefore, cheaper than competitors.

Our takeaway from this Q3 report is that, while the EPS/revenue numbers did miss the mark, underlying demand seems quite brisk. That was very evident in its robust RPO growth and in the general commentary on the call. Also, while the Q4 guidance was a letdown, the comments about FY26 and increased guidance for FY27 were comforting to hear. Oracle is a large company and companies this size rarely talk about revenue growth accelerating two years out. The stock is lower today on the near term results/guidance, but its comments about how OCI demand continues to dramatically outstrip supply speaks well for the long term.