Oracle released its latest earnings report, and the stock immediately plunged 11%.

Looking purely at the core numbers, the results are actually impressive:

Revenue up 13% YoY, cloud revenue surging 33%, and EPS jumping 51%.

Most shocking of all: RPO (remaining performance obligations) skyrocketed 433% to $523.3 billion, showing a massive pipeline of future orders.

So… what exactly is the market selling off?

Because Oracle is still burning cash. Free cash flow this quarter was negative $10 billion, and capital expenditure for FY2026 was revised upward by another $15 billion from prior expectations.

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Management's rosy vision vs. harsh reality

Management remains highly confident about the future:

1. Margins will take off 

As AI capacity comes online, gross margins for AI infrastructure are expected to rise significantly to 30–40%.

2. No fear of idle capacity 

Compute resources are highly fungible. If one customer drops out, capacity can be reassigned within hours. No risk of hardware turning into scrap.

3. Capital pressure is overstated $$

The CEO said the rumored $100 billion financing need is greatly exaggerated and that actual needs are far lower.

Their reasoning: Oracle has flexible risk-control approaches—like “customer-provided chips” or “supplier leasing”—that significantly reduce upfront capital expenditure.

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However, while management paints a beautiful picture, the numbers in the earnings report tell the truth.

Investors are seeing huge cash outflows and soaring capex, not profits that haven't arrived yet.

This gap between what's promised and what's delivered is what triggered the sharp correction.

Until negative cash flow turns positive, if AI demand slows even slightly, massive hardware depreciation could become a heavy burden for Oracle

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Still, the enormous $523.3 billion RPO means Oracle has already locked in years of future revenue.

Today's cash burn is for building that future. If these orders convert smoothly into revenue, today's dip may turn out to be the best buying opportunity.