Analysis of the Form 10-K and the 2026 proxy statement | Fiscal year ended 31 May 2026
FY2026, ended 31 May 2026. Reporting currency: US dollar. Accounting framework: US GAAP. Amounts are in US$ millions unless otherwise stated; the document reports in millions and the data table published alongside this report keeps the same unit. The multiples use only the closing price of US$225.78 on 31 May 2026 and the 2,880,471,000 common shares outstanding at 12 June 2026 shown on the cover page: the first was supplied to the analysis, the second is the cover-page figure, and the two dates are twelve days apart. No other market data enters the calculations.
Oracle sells businesses the software their processes run on and, for some years now, the computing capacity that software can run on. The two have opposite economics, and this is the year in which the second overtook the first in weight on revenue.
The old model is simple: grant a perpetual licence to the database, the middleware or the applications, collect at once, and sell a renewable annual support contract priced as a percentage of the licence. The document states that "substantially all software support customers renew their support contracts with us upon expiration". It is an annuity on an installed base built over thirty years, billed in advance, with a low cost to serve. The new model is cloud, in two forms: applications (SaaS), sold on one- to five-year subscriptions, and infrastructure (OCI), sold on consumption or under committed multi-year contracts. Here the revenue arrives over time and the cost arrives first, in the shape of data centres to be built or leased.
The document reports three operating segments — cloud and software, hardware, services — and four revenue lines. Cloud and software is 87% of revenue.
Revenue by category
| Item (US$ mn) | FY2026 | % of total | FY2025 | FY2024 | YoY 26/25 | YoY 25/24 |
|---|---|---|---|---|---|---|
| Cloud | 33,989 | 50.5% | 24,506 | 19,774 | +38.7% | +23.9% |
| Software | 24,541 | 36.4% | 24,724 | 24,690 | −0.7% | +0.1% |
| Hardware | 3,084 | 4.6% | 2,936 | 3,066 | +5.0% | −4.2% |
| Services | 5,743 | 8.5% | 5,233 | 5,431 | +9.7% | −3.6% |
| Total | 67,357 | 100.0% | 57,399 | 52,961 | +17.3% | +8.4% |
Within those lines the document goes down one level, and that is where the reversal shows. Cloud infrastructure goes from $10,234 million to $18,101, up 76.9%, and on its own explains four fifths of cloud growth; cloud applications grow 11.3%. On the other side software licences fall 8.9%, from $5,201 million to $4,737, and software support grows 1.4%, from $19,523 to $19,804. The company growing 17.3% is in fact two companies: one growing 77% and one standing still.
Revenue by region
| Region (US$ mn) | FY2026 | % of total | FY2025 | FY2024 | YoY 26/25 |
|---|---|---|---|---|---|
| Americas | 44,478 | 66.0% | 36,339 | 33,122 | +22.4% |
| EMEA | 15,297 | 22.7% | 14,025 | 13,030 | +9.1% |
| Asia Pacific | 7,582 | 11.3% | 7,035 | 6,809 | +7.8% |
| Total | 67,357 | 100.0% | 57,399 | 52,961 | +17.3% |
Geographic concentration has tightened: the Americas contributed 88% of constant-currency revenue growth, and the United States alone is $39,835 million, 59.1% of the total. The same geographic note gives long-lived assets by country, and the jump there is more violent than in revenue: US long-lived assets go from $45,439 million to $102,717 in a year.
At 31 May 2026 the group employed approximately 141,000 full-time people, 49,000 of them in the United States, against a restructuring plan launched in the same year. The document breaks the workforce down: 43,000 in research and development, 34,000 in services, 26,000 in cloud and software, 25,000 in sales and marketing, 11,000 in general functions, 2,000 in hardware. Average tenure is about eight years and 31% of employees have been with Oracle for ten years or more.
The change at the top is the corporate fact of the year. On 22 September 2025 Safra Catz stepped down as chief executive and became executive vice chair of the board; the board appointed two chief executive officers, Clayton Magouyrk and Michael Sicilia, both from inside. On 6 April 2026 Hilary Maxson became chief financial officer; in the interval the principal financial officer role was held on an interim basis by Douglas Kehring, who remains executive vice president and head of operations. The 10-K is signed by two chief executives, and Lawrence Ellison signs it as executive chair and chief technology officer.
Relative to the comparative columns the document introduces three things that did not exist before: the issue, on 5 February 2026, of 50,000 shares of 6.50% mandatory convertible preferred stock for $5.0 billion net; an at-the-market equity programme of up to $20 billion, unused; and a cash flow statement line — "increase in deferred revenues from customer prepayments with significant financing component", $4,592 million — which the note states was zero in both prior years. To these is added, without the document giving any comparative, the note disclosing $260 billion of lease commitments that do not appear on the balance sheet.
Fast grower. Two figures from the document settle it: revenue grows 17.3% but capital expenditure goes from $21,215 million to $55,663, up 162.4%, reaching 82.6% of revenue. A company reinvesting four fifths of its sales is not a stalwart, whatever the age of the brand. Nor is it one on margins, which are not stable: gross margin falls from 71.4% to 65.8% in two years. It is not a cyclical: the document has a section headed "Seasonality and Cyclicality", but it concerns the quarterly seasonality of contracting, and the only replacement cycle it describes is hardware's, which is 4.6% of revenue. The rest of the business is tied to customers' demand for computing capacity, not to a price. It is not an asset play either, despite negative tangible equity and fixed assets at 38.2% of the balance sheet: those assets are servers, not property with a value independent of the business running on it.
The category changes what matters. In a fast grower a negative free cash flow can be consistent with the model or be the problem, and the difference is made by the return on invested capital. At Oracle that return is computable for two years only, and it is falling.
What stops a customer from leaving? The document offers two answers of different kinds, one solid and one still to be proved.
The first is the cost of replacing the enterprise software and the database. It is not asserted: it is readable in the support numbers. Software support revenue is $19,804 million, 29.4% of the total, and moves +1.4% after −0.4% the year before, while new licences fall 8.9%. A base that renews almost in full year after year while new sales decline describes a customer who no longer buys but does not leave either. The document puts it in one line: support customers renew "in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements".
The second is computing capacity, and here the advantage is not yet an advantage but an investment. The document lists 181 data centre locations worldwide, "substantially all of which are leased", and discloses $260 billion of additional lease commitments not recognised on the balance sheet, substantially all related to data centres, expected to commence between the first quarter of FY2027 and FY2029 and with terms of fifteen to nineteen years. Whoever signs commitments on that scale is buying a position, not defending one.
The document is explicit about the weak point of that position: "the terms, renewal options and pricing adjustments in our long-term data center leases typically do not align with the duration and pricing of customer contracts, and if customers do not renew their contracts, we may be unable to re-lease, repurpose or assign such capacity on acceptable terms, if at all". It is the most important sentence in the whole risk-factor section, because it describes a duration mismatch between a certain commitment of fifteen to nineteen years and a revenue the document itself does not guarantee beyond the contract.
On concentration the document says two things that have to be read together. The concentrations note states that "no single customer accounted for 10% or more of our total revenues in fiscal 2026, 2025 or 2024"; the cloud risk factor states that "in certain OCI offerings, we are more concentrated among a number of large customers". Neither is false: consolidated revenue is fragmented, the part that is growing is not. The document does not quantify the second, and that is a disclosure gap this report returns to.
The competitors the document names are Adobe, Alphabet, Amazon.com, Cisco Systems, Intel, IBM, Microsoft, Salesforce and SAP, alongside Hewlett-Packard Enterprise and Workday, and in healthcare Allscripts, Arcadia Solutions, athenahealth, Epic Systems and InterSystems. The document lists them without offering any comparison of share or margin, and this report adds none.
The document publishes no average prices or rate cards, and for a company selling contracts negotiated one by one there is no list price to compare. Pricing power therefore has to be read from margin, and the income statement allows it, because it shows revenue on four lines and direct costs on three.
| Gross margin by line | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Cloud and software | 69.9% | 76.5% | 78.8% |
| Hardware | 71.9% | 73.4% | 70.9% |
| Services | 20.7% | 12.6% | 11.2% |
| Total | 65.8% | 70.5% | 71.4% |
The direct costs used here are those the income statement shows, excluding amortisation of intangible assets, which the statement presents on a separate line; the same convention applies to all three years.
The reading is blunt. All of the group's margin compression comes from cloud and software, which loses 8.9 points in two years, while hardware is broadly flat and services improve 9.5 points off a small base. And inside cloud and software the cause is stated: the costs on the "cloud and software" line go from $11,569 million to $17,597, up 52.1%, against segment revenue up 18.9%. Management attributes the increase to "higher infrastructure expenses" of $5.7 billion in constant currency. The decomposition confirms the explanation and sharpens it: this is not an investment passing through the income statement as an exceptional item, it is the recurring cost of delivering a service whose economics differ from those of the licence it replaces.
Two facts qualify the picture. The first is that the margin loss is not a pricing problem but a mix problem: every licence dollar that becomes a cloud dollar brings with it an infrastructure cost that did not exist before. The second is that the company held operating margin at 31% despite those 4.7 points of gross margin lost in a year, because the expenses below the line grew far more slowly than revenue. Pricing power in the sense of being able to raise prices the document documents nowhere; what it documents is the ability not to lose customers.
In FY2026 growth is entirely organic. The cash flow statement shows a single investing line — "purchases of marketable securities and other investments and acquisitions", $2,039 million — which aggregates acquisitions and securities purchases without separating them, and goodwill moves from $62,207 million to $62,261, up $54 million, a change the note attributes entirely to currency translation. A business combination would have generated goodwill, and there is none. A trace of technology purchased does exist: Note 5 shows $313 million of gross additions to intangible assets, $287 million of it in developed technology.
In the opposite direction there is a disposal. On 25 November 2025 SoftBank Group acquired the whole of Ampere Computing Holdings, an equity-method investee; Oracle received $4.3 billion in cash for its equity, debt and call option interests, recording a $2.7 billion realised gain in non-operating income. It is the single largest item in the result below the operating line, and it has to be removed before reading the growth in net income.
The transparency limit therefore lies not in the perimeter, which is stable, but in the fact that the document does not show cash paid for acquisitions net of cash acquired. The figure remains boundable: the MD&A states that $864 million of the $2,039 million line was cash used for purchases of non-current investments, which leaves at most $1,175 million for marketable securities and acquisitions together. It is a ceiling, not a figure, and should be read as one.
| Item (US$ mn) | FY2026 | FY2025 | FY2024 | YoY 26/25 | YoY 25/24 |
|---|---|---|---|---|---|
| Revenue | 67,357 | 57,399 | 52,961 | +17.3% | +8.4% |
| Direct costs — cloud and software | 17,597 | 11,569 | 9,427 | +52.1% | +22.7% |
| Direct costs — hardware | 868 | 782 | 891 | +11.0% | −12.2% |
| Direct costs — services | 4,556 | 4,576 | 4,825 | −0.4% | −5.2% |
| Sales and marketing | 8,331 | 8,651 | 8,274 | −3.7% | +4.6% |
| Research and development | 10,272 | 9,860 | 8,915 | +4.2% | +10.6% |
| General and administrative | 1,618 | 1,602 | 1,548 | +1.0% | +3.5% |
| Amortisation of intangible assets | 1,671 | 2,307 | 3,010 | −27.6% | −23.4% |
| Restructuring and other | 1,838 | 374 | 718 | +391.4% | −47.9% |
| Total operating expenses | 46,751 | 39,721 | 37,608 | +17.7% | +5.6% |
Scale exists, but all of it sits in two lines. Sales and marketing falls 3.7% in absolute terms while revenue grows 17.3%, going from 15.1% to 12.4% of revenue; research and development grows 4.2% and falls from 17.2% to 15.3%. That is 4.6 points of revenue released in a year by two lines alone. They are not the only ones moving the operating margin, which changes by 0.2 points: gross margin takes away 4.70, sales and marketing give back 2.70, research and development 1.93, general expenses 0.39 and amortisation of intangibles 1.54, while restructuring takes away another 2.08. The stability of the operating margin therefore rests on three levers that may last — the two discretionary expenses and the amortisation that is running out — and on one line that worked against it this year.
Below the direct cost line the direction is the opposite and there is no room to manoeuvre: infrastructure cost grows three times faster than the revenue it serves, and that is the component set to grow further, because the $39,973 million of construction in progress is not yet depreciating. Oracle's model scales well on discretionary spending, which is finite, and badly on the cost of producing cloud, which has only just begun.
| Item (US$ mn) | FY2026 | FY2025 | FY2024 | YoY 26/25 | YoY 25/24 |
|---|---|---|---|---|---|
| Revenue | 67,357 | 57,399 | 52,961 | +17.3% | +8.4% |
| Direct costs (cloud and software, hardware, services) | (23,021) | (16,927) | (15,143) | +36.0% | +11.8% |
| Gross profit | 44,336 | 40,472 | 37,818 | +9.5% | +7.0% |
| Gross margin | 65.8% | 70.5% | 71.4% | −4.7 pp | −0.9 pp |
| Sales and marketing | (8,331) | (8,651) | (8,274) | −3.7% | +4.6% |
| Research and development | (10,272) | (9,860) | (8,915) | +4.2% | +10.6% |
| General and administrative | (1,618) | (1,602) | (1,548) | +1.0% | +3.5% |
| Amortisation of intangible assets | (1,671) | (2,307) | (3,010) | −27.6% | −23.4% |
| Restructuring and other | (1,838) | (374) | (718) | +391.4% | −47.9% |
| Operating income | 20,606 | 17,678 | 15,353 | +16.6% | +15.1% |
| Operating margin | 30.6% | 30.8% | 29.0% | −0.2 pp | +1.8 pp |
| Interest expense | (4,599) | (3,578) | (3,514) | +28.5% | +1.8% |
| Non-operating income (expenses), net | 3,547 | 60 | (98) | n.m. | n.m. |
| Income before income taxes | 19,554 | 14,160 | 11,741 | +38.1% | +20.6% |
| Provision for income taxes | (2,467) | (1,717) | (1,274) | +43.7% | +34.8% |
| Effective tax rate | 12.6% | 12.1% | 10.9% | +0.5 pp | +1.2 pp |
| Net income | 17,087 | 12,443 | 10,467 | +37.3% | +18.9% |
| Preferred stock dividends | (103) | — | — | n.m. | n.m. |
| Net income available to common shareholders | 16,984 | 12,443 | 10,467 | +36.5% | +18.9% |
| Net margin | 25.4% | 21.7% | 19.8% | +3.7 pp | +1.9 pp |
| Basic earnings per share (US$) | 5.94 | 4.46 | 3.82 | +33.2% | +16.8% |
| Diluted earnings per share (US$) | 5.83 | 4.34 | 3.71 | +34.3% | +17.0% |
| Weighted average basic shares (mn) | 2,860 | 2,789 | 2,744 | +2.5% | +1.6% |
| Weighted average diluted shares (mn) | 2,914 | 2,866 | 2,823 | +1.7% | +1.5% |
Net income grows 37.3% while operating income grows 16.6%, and the gap does not come from operations. It comes from two lines below them. The first is non-operating income, up from $60 million to $3,547, within which sit $2,811 million of gains on investments of which $2,700 is the gain on the Ampere disposal; in FY2025 the same line was negative by $278 million. The second is the tax rate, which stays at 12.6% even as pre-tax income grows 38.1%. Without the Ampere gain, and taxing the remainder at the year's effective rate, net income would be $14,730 million instead of $17,087, and growth would stop at 18.4% rather than 37.3%.
Diluted earnings per share grow less than net income because the numerator is income available to common shareholders, reduced by the $103 million of dividends on the preferred shares issued in February. It is the first year that line exists.
| Item (US$ mn) | 31/05/2026 | 31/05/2025 |
|---|---|---|
| Cash and cash equivalents | 31,289 | 10,786 |
| Marketable securities | 605 | 417 |
| Trade receivables, net | 10,385 | 8,558 |
| Prepaid expenses and other current assets | 4,288 | 4,818 |
| Total current assets | 46,567 | 24,579 |
| Property, plant and equipment, net | 99,957 | 43,522 |
| Operating lease right-of-use assets | 29,690 | 13,145 |
| Goodwill | 62,261 | 62,207 |
| Deferred tax assets | 11,541 | 11,877 |
| Other non-current assets | 11,743 | 13,031 |
| TOTAL ASSETS | 261,759 | 168,361 |
| Notes payable and other borrowings, current | 7,199 | 7,271 |
| Accounts payable | 10,977 | 5,113 |
| Accrued compensation and related benefits | 2,225 | 2,243 |
| Deferred revenues, current | 9,916 | 9,387 |
| Other current liabilities | 11,447 | 8,629 |
| Total current liabilities | 41,764 | 32,643 |
| Notes payable and other borrowings, non-current | 122,342 | 85,297 |
| Income taxes payable | 11,771 | 10,269 |
| Operating lease liabilities, non-current | 26,648 | 11,536 |
| Other non-current liabilities | 16,178 | 7,647 |
| TOTAL LIABILITIES | 218,703 | 147,392 |
| Mandatory convertible preferred stock | 4,954 | — |
| Common stock and additional paid in capital | 43,243 | 37,107 |
| Accumulated deficit | (4,309) | (15,481) |
| Accumulated other comprehensive loss | (1,380) | (1,175) |
| Oracle Corporation stockholders' equity | 42,508 | 20,451 |
| Noncontrolling interests | 548 | 518 |
| Total stockholders' equity | 43,056 | 20,969 |
| Gross financial debt (notes and other borrowings) | 129,541 | 92,568 |
| Gross financial debt including finance leases | 137,242 | 95,502 |
| Gross debt including all leases | 167,432 | 108,952 |
| Net financial position (finance leases included) | (105,348) | (84,299) |
Assets grew by $93.4 billion in twelve months, and $56.4 billion of that is net property, plant and equipment, $16.5 billion right-of-use assets and $20.5 billion cash. It is the balance sheet of a company that is building, not of one that is harvesting.
Financial debt rose by $36.97 billion at carrying value, after $43.0 billion par of bond issuance in the year alone, with coupons reaching 6.70% and 6.85% on the long maturities. The net financial position, computed on available liquidity only and including finance leases, is negative by $105.3 billion against $84.3 billion a year earlier. The document discloses no material restricted cash: the note states that restricted cash included in the balance was "immaterial", so net debt is computed on the whole of liquidity.
| Item (US$ mn) | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Net income | 17,087 | 12,443 | 10,467 |
| Depreciation | 7,623 | 3,867 | 3,129 |
| Amortisation of intangible assets | 1,671 | 2,307 | 3,010 |
| Stock-based compensation | 4,811 | 4,674 | 3,974 |
| Deferred income taxes | (917) | (1,637) | (2,139) |
| Gains from investments and other, net | (2,433) | 667 | 720 |
| Change in working capital | 4,135 | (1,500) | (488) |
| Operating cash flow | 31,977 | 20,821 | 18,673 |
| Capital expenditure | (55,663) | (21,215) | (6,866) |
| Free cash flow | (23,686) | (394) | 11,807 |
| Free cash flow net of stock-based compensation | (28,497) | (5,068) | 7,833 |
| Share repurchases | (95) | (600) | (1,202) |
| Shares repurchased for tax withholdings | (111) | (900) | (2,040) |
| Dividends paid | (5,787) | (4,743) | (4,391) |
| Cash paid for income taxes | (3,704) | (4,020) | (3,560) |
| Unpaid capital expenditure at year end | 5,279 | 2,970 | 1,637 |
Free cash flow is negative by $23,686 million. It is not an estimate: it is the measure the company itself publishes in the MD&A, where the line "free cash flow as percent of net income" reads −139%. In FY2025 it was already negative by $394 million, and the last year with a positive flow among the three available is FY2024, at $11,807 million.
Operating cash flow grows 53.6% against revenue at 17.3%, and the difference has three identifiable components. Depreciation doubles, from $3,867 million to $7,623, and is a non-cash cost added back. Working capital goes from absorbing $1,500 million to releasing $4,135, and inside that release sit $4,592 million of customer prepayments with a significant financing component, a line worth zero in both prior years. The third element is the reversal of the investment gains line, which subtracts $2,433 million in FY2026 because the Ampere gain is collected in the investing section and not the operating one.
Owner earnings, defined as net income plus non-cash items less capital expenditure less the additional working capital absorbed in the year, are −$27,821 million before working capital and −$23,686 after it. The second figure coincides with free cash flow because working capital released cash rather than absorbing it, and the difference between the two measures, $4,135 million, is exactly that release. Stock-based compensation is not deducted a second time, since net income already contains it; the non-cash investment gain is excluded using the same cash flow line that excludes it from operating cash.
On dilution, stock-based compensation is $4,811 million, 7.1% of revenue and 23.4% of operating income. In FY2026 Oracle repurchased 0.4 million shares for $93 million and issued 72 million for compensation plans plus 1 million for the employee purchase plan: net dilution is about 73 million shares, 2.6% of the opening share count. The repurchase does not cover one dollar in fifty of the year's stock-based compensation: it is not returning capital, and it is not plugging the dilution either.
To the dilution already incurred is added one already contracted. The 50,000 preferred shares issued in February convert automatically on 15 January 2029 into between 499.8126 and 624.7657 common shares each, that is between 25.0 and 31.2 million shares, 0.9% to 1.1% of the current share count. In FY2026 that conversion is excluded from diluted earnings per share as anti-dilutive, together with other instruments, for 31 million shares in all. It is not an option that can expire worthless: it is a mandatory conversion.
| Metric | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Gross margin | 65.8% | 70.5% | 71.4% |
| Operating margin | 30.6% | 30.8% | 29.0% |
| Net margin | 25.4% | 21.7% | 19.8% |
| EBITDA (US$ mn) | 29,900 | 23,852 | 21,492 |
| Capex / revenue | 82.6% | 37.0% | 13.0% |
| Capex / depreciation and amortisation | 5.99x | 3.44x | 1.12x |
| SBC / revenue | 7.1% | 8.1% | 7.5% |
| Cash taxes paid / tax provision | 150.1% | 234.1% | 279.4% |
| ROIC | 10.1% | 13.1% | not available |
| Gross debt / EBITDA | 4.59x | 4.00x | not available |
| Net debt / EBITDA | 3.52x | 3.53x | not available |
| Interest coverage (operating income / interest expense) | 4.48x | 4.94x | 4.37x |
| FCF / net income conversion | −138.6% | −3.2% | 112.8% |
| Revenue per employee (US$ thousands) | 477.7 | not available | not available |
ROIC is operating income taxed at the year's effective rate, over equity plus gross debt including all leases less liquidity, on year-end balances and with the same convention in both years. The balance sheet is presented for two years only: for FY2024 equity and cash are known but the lease liabilities are not, and without them invested capital cannot be rebuilt on the same basis. The two available values are two points, not a trend. The debt-to-EBITDA ratio uses debt at carrying value including finance leases and excluding operating ones; including them the gross ratio rises to 5.60x. The document discloses one covenant, on the revolving facility — the ratio of "Consolidated EBITDA" to "Consolidated Net Interest Expense" may not fall below 3.0 at the end of any quarter — but both terms are defined in the agreement and not in the financial statements, so the figure computed here, 7.83x on income-statement EBITDA and net interest, is an order of magnitude and not the contractual test. The document states that at 31 May 2026 the company was in compliance with all covenants.
On multiples, the 31 May 2026 closing price and the 12 June 2026 cover-page share count give a market capitalisation of the common stock alone of $650,353 million and an enterprise value of $760,701 million, the latter computed by adding to market capitalisation the preferred stock at its liquidation preference and debt at carrying value including finance leases, and subtracting liquidity.
| Multiple | Value |
|---|---|
| Price / net income available to common | 38.3x |
| Price / diluted earnings per share | 38.7x |
| Price / revenue | 9.66x |
| Price / tangible book value | not meaningful (tangible equity is negative) |
| EV / operating income | 36.9x |
| EV / EBITDA | 25.4x |
| Operating income / EV | 2.71% |
| Free cash flow yield | negative |
| Dividend yield (US$2.00 per share) | 0.89% |
The free cash flow yield is not computed because the flow is negative: writing it as a negative percentage would give the impression of a measure, and it is not one. The multiple that stays readable when net income is inflated by a disposal gain and cash flow is below zero is the operating return on enterprise value, 2.71%.
The statements say how much. The notes say how much of that number is management's opinion. The auditor isolates one; the notes contain nine more that weigh as much.
Uncertain tax positions (Critical Audit Matter). It is the only critical audit matter declared by Ernst & Young, and the only critical accounting estimate management declares in the MD&A. Gross unrecognised tax benefits are $10,126 million, against $9,438 a year earlier and $8,785 two years earlier: they grow for the third consecutive year among those in the document, and $4.9 billion of them would affect the effective tax rate if recognised. Accrued interest and penalties are $2.7 billion, against $2.1 billion the year before, and the year's charge for interest and penalties alone is $594 million against $321. The judgement lies where the auditor points: "certain intercompany transfer prices and calculations, including the interpretation and application of tax laws and legal rulings in various jurisdictions". What would move it is the closing of an examination or a ruling; the document states that US authorities are examining returns through fiscal 2024 and that the significant disputes concern transfer pricing and involve Australia, Brazil, Canada, Egypt, India, Indonesia, Ireland, Israel, Pakistan, Saudi Arabia, South Korea and Spain. The document gives no sensitivity and declares no range of additional loss.
The effective rate and what it is made of. The rate is 12.6% against a 21% federal statutory rate, and the reconciliation shows that one line explains the gap: the tax benefit on stock-based compensation, −$2,062 million, worth −10.6 points. Without that line the rate would be 23.2% and net income $15,025 million instead of $17,087. It is a benefit that depends on the share price at vesting rather than on any choice the company makes, and it reverses when the stock falls: the document itself warns that future rates could suffer from "shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes". The same reconciliation carries $933 million of one-off charge from the US act of 4 July 2025 and a $1,587 million benefit from tax credits.
Deferred tax assets and the valuation allowance. Gross deferred tax assets are $31,772 million, with a valuation allowance of $2,483 million, up from $1,962. The allowance relates, in the note's words, to US, state and foreign tax credits and net operating loss carryforwards. The heaviest component is new: $9,333 million of deferred tax assets on lease liabilities, against $3,279 a year earlier, facing $9,181 million of deferred tax liabilities on the corresponding right-of-use assets. The two offset almost exactly, and their parallel growth is the accounting imprint of the $18.2 billion of new operating leases signed in the year. Management writes that realisation of the $11,219 million of net deferred tax assets "is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions": it is an asset resting on future taxable income and on where it will be earned.
Debt. Total par value is $130,105 million, carrying value $129,541 after $564 million of discounts and issuance costs, and the fair value disclosed in the note for the bonds and long-term borrowings is $114.4 billion against $128.1 billion of carrying value. The gap, $13.7 billion, is the market discounting debt partly issued at the low coupons of earlier years. The maturity profile is long: $7,210 million in FY2027, $10,145 in FY2028, $5,500 in FY2029, $7,250 in FY2030, $9,750 in FY2031 and $90,250 thereafter. Almost all of it is fixed rate; the only exceptions are $1,000 million of floating-rate notes, $5,137 million of SOFR-linked term loan swapped to an effective 4.74%, and $1,468 million of commercial paper. There is a single covenant, on the $10.0 billion revolving facility: the ratio of EBITDA to net interest expense, as defined in the agreement, not below 3.0. The facility was entirely undrawn at 31 May 2026.
Stock-based compensation. The year's cost is $4,811 million, but the figure that concerns the future is a different one: $8.9 billion of unrecognised cost on restricted awards, to be released over 2.72 years, plus $1.8 billion on options expected to vest, over 3.30 years. That is $10.7 billion of dilution already contracted, equal to 62.6% of the year's net income. The mix has changed: restricted awards granted fall from 38 to 23 million while options granted go from zero to 15 million, at a weighted average exercise price of $279.53. At year end options outstanding are 21 million at a weighted average of $217.63, and total intrinsic value is $884 million, of which $789 million on the already vested options alone.
Revenue, deferred revenue and remaining obligations. Total deferred revenue rises from $10,733 million to $15,395, and almost all of the increase sits in the non-current portion, which goes from $1,346 to $5,479 while the current portion grows by $529: it is the accounting counterpart of the $4.6 billion of prepayments with a significant financing component. Revenue recognised in the year from opening deferred balances is about $9.4 billion, against $9.3 the year before. The number that dominates everything else is another one: remaining performance obligations go from $138 billion to $638 billion in a single year. The document states that it expects to recognise 12% as revenue over the next twelve months, 34% between month 13 and month 36, 34% between month 37 and month 60 and the remainder thereafter. The 12% is about $76.6 billion, against $67.4 billion of revenue in the year just closed.
Goodwill and intangible assets. Goodwill is $62,261 million, 23.8% of assets, allocated to three units: $57,114 to cloud and software, $2,732 to hardware, $2,415 to services. The impairment test was performed on 1 March 2026 and produced no write-down, as in the two prior years. What the document does not disclose is the headroom between recoverable amount and carrying amount of the units. A test passed without a disclosed headroom says that management does not believe it must write down, not how much room is left before it must. Net intangible assets fall to $3,229 million from $4,587, with expected amortisation of $731 million in FY2027 declining to $225 beyond FY2031: the $1,671 million line that weighs on the income statement today is set to more than halve in FY2027 alone, and that is worth 1.4 points of operating margin arriving without anything improving in the business.
Fair value and investments. Assets measured at fair value on a recurring basis are $24,162 million, of which $23,455 Level 1 and $707 Level 2. There is nothing in Level 3. So 9.2% of assets are measured on observable prices and the rest is carried at amortised historical cost. Non-marketable investments are $2.3 billion against $2.1, and the document states that the substantial majority of the balance at 31 May 2026 is the 15% interest in TikTok USDS Joint Venture LLC, an equity-method investee: Note 1 specifies that equity-method investees are related parties for disclosure purposes. A year earlier the substantial majority was Ampere. On revaluations passing through the income statement, the line is +$2,811 million in FY2026 and −$278 in FY2025: isolating it, pre-tax income for the year falls from $19,554 million to $16,743 and FY2025 rises from $14,160 to $14,438.
Litigation. The document names two proceedings. The first is the Dutch privacy class action begun in 2020, in which the claimant seeks €500 of immaterial damages for every Dutch internet user plus other heads of claim; on 30 January 2026 the Advocate General issued a non-binding opinion adverse to Oracle and the Supreme Court judgment was scheduled for 28 June 2026, after the filing date. The second is a securities class action filed on 3 February 2026 in Delaware against the company, the two chief executives, the chief technology officer, two other executives and one director, over allegedly false statements about the cloud infrastructure business. For both the document says it does not expect a material impact and declares no accrual and no range of reasonably possible additional loss. The absence of a range on a securities class action filed four months before year end is information missing, not reassurance.
Leases, commitments and guarantees. Recognised leases are $30,190 million of operating liabilities and $7,701 of finance liabilities, with total nominal payments of $41,867 million and $11,460 and imputed interest of $11,677 and $3,759. Off balance sheet there are $260 billion of further lease commitments, expected to commence between FY2027 and FY2029 with terms of fifteen to nineteen years, within which the document flags a guarantee of up to $3.3 billion of a lessor's borrowing, maturing in September 2026. There are then $13,309 million of unconditional purchase obligations, primarily for data centre power. Total commitments not on the balance sheet at the reporting date are therefore $273,309 million, more than four times annual revenue and more than twice the entire financial debt. The document further states that after year end a further $19 billion of five-year commitments for cloud infrastructure were entered into, taking the total to $292 billion.
Four asset lines exceed 5% of the total: property, plant and equipment 38.2%, goodwill 23.8%, cash 12.0%, operating lease right-of-use assets 11.3%. Three liability lines do the same: non-current borrowings 46.7%, non-current operating lease liabilities 10.2%, other non-current liabilities 6.2%. Three lines sit just below the threshold and are treated anyway because their nature requires it: deferred tax assets 4.4%, income taxes payable 4.5%, other current liabilities 4.4%. Other non-current assets, 4.5% of the total, are not broken down by the document except for three components — deferred compensation plans at about $1.4 billion, non-marketable investments at $2.3 billion and the non-current portion of deferred sales commissions, whose amount is not stated.
Property, plant and equipment. Gross historical cost goes from $59,554 million to $122,651 and accumulated depreciation from $16,032 to $22,694. Two ratios say more than the net figure. First: accumulated depreciation falls from 26.9% to 18.5% of historical cost, meaning the base has become much younger and current depreciation is low relative to what it will be. Second: construction in progress is $39,973 million, 32.6% of gross historical cost, and by definition does not depreciate. The note states that it comprises "primarily of servers, networking equipment and leasehold improvements to be deployed at our data centers" and that servers have an estimated useful life of six years. When those $40 billion enter service, all else equal annual depreciation will rise by about $6,662 million, equal to 32.3% of FY2026 operating income. Today's margin embeds capacity not yet in use.
The finance-lease share is the other half of the required calculation: finance-lease right-of-use assets included in net property are $7,464 million, 7.5% of the net total, against $2,874 and 6.6% a year earlier. These are assets the company did not buy, and anyone computing asset turnover or invested capital needs to know it. To them are added $29,690 million of operating lease right-of-use assets, shown on a line of their own outside property.
On goodwill and intangibles the previous section has already said what they are worth and how they were tested. One figure matters here: $62,261 million of goodwill against Oracle stockholders' equity of $42,508. Goodwill alone exceeds equity by $19,753 million, and that is the arithmetic reason tangible equity is negative.
Deferred tax assets. $11,541 million are carried among non-current assets, and $11,219 net. They are made of $9,333 million on lease liabilities, $6,882 of differences on property and intangibles, $6,602 of credit and loss carryforwards, $5,784 of research and development capitalised for tax purposes. The part that depends on expected future income is the credits and losses, $6,602 million gross, against which the $2,483 million allowance is already recorded. The document discloses federal loss carryforwards of $374 million, state of $2.7 billion and foreign of $2.0 billion, and tax credit carryforwards of $1.5 billion.
"Other liabilities" and accruals. Other current liabilities are $11,447 million and non-current $16,178, together 10.6% of assets. The document breaks them down only in part: it states that current income taxes payable of $583 million sit in other current liabilities, that $581 million and $72 million of restructuring accrual sit in current and non-current respectively, and that deferred compensation plans, about $1.4 billion, sit in non-current. Finance lease liabilities, $620 million current and $7,081 non-current, have no line of their own on the balance sheet and are deducible by difference as components of these two captions. The residual is not broken down, and for other non-current liabilities that residual is about $7.6 billion.
Liquidity. $31,289 million of cash and $605 of marketable securities, $31,894 in all. The note states that restricted cash included in the balance is immaterial, so the whole of liquidity is treated as available and net debt is computed on it. Within cash, $23,521 million are investments classified as cash equivalents, of which $23,387 in money market funds: it is real liquidity, not illiquid holdings.
Debt, three measures. Par value is $130,105 million; carrying value, net of $564 million of discounts and issuance costs, is $129,541; the fair value disclosed for the bonds and long-term borrowings is $114.4 billion against $128.1 of carrying value, and adding commercial paper at par gives $115.9 billion in all. The leverage ratios in this report use carrying value, because that is what the balance sheet records. The enterprise value also uses carrying value: with fair value it would fall from $760,701 million to $747,028, that is by 1.8%, and the ratio of operating income to enterprise value would rise from 2.71% to 2.76%. The difference does not change the judgement, but it had to be written.
Working capital in days. Inventory has no line of its own on the balance sheet and its turnover is not computable. Days sales outstanding, on year-end point balances and with the same convention in both years, are 56.3 in FY2026 against 54.4 in FY2025; days payable, on direct costs, are 174.0 against 110.2. The cash conversion cycle is not a meaningful measure for a company with no inventory that collects support contracts in advance, and the lengthening of payment days has to be read together with the $5,279 million of capital expenditure unpaid at year end: much of the growth in accounts payable is purchased infrastructure, not current services.
Equity. $42,508 million attributable to Oracle and $548 to noncontrolling interests. Within the first, $4,954 million is the mandatory convertible preferred stock issued in February, $43,243 is common stock and additional paid in capital, −$4,309 is accumulated deficit and −$1,380 the negative reserve from translation and other components. The accumulated deficit shrank by $11,172 million in one year, through income net of dividends, and equity more than doubled almost entirely for internal accounting reasons rather than through contributions: the $5.0 billion of preferred is the only external one.
So 9.2% of assets are measured on an observable price, nothing is measured on an internal Level 3 estimate, and the remaining 90.8% is carried at historical cost. For a balance sheet in which 23.8% of assets is goodwill and 38.2% is servers under construction or just entered into service, the absence of Level 3 items does not mean the value is verifiable: it means it is not subjected to a market valuation.
Operating cash flow is $31,977 million, 187% of net income. The question is where that 187% comes from, and the decomposition gives three answers.
| Component (US$ mn) | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Net income | 17,087 | 12,443 | 10,467 |
| Depreciation and amortisation | 9,294 | 6,174 | 6,139 |
| Stock-based compensation | 4,811 | 4,674 | 3,974 |
| Deferred income taxes | (917) | (1,637) | (2,139) |
| Gains and losses from investments and other | (2,433) | 667 | 720 |
| Trade receivables | (2,190) | (653) | (965) |
| Prepaid expenses and other assets | 2,179 | 266 | 542 |
| Accounts payable and other liabilities | (240) | (608) | (594) |
| Income taxes payable | (256) | (659) | (127) |
| Deferred revenue from financing-component prepayments | 4,592 | — | — |
| Other deferred revenues | 50 | 154 | 656 |
| Operating cash flow | 31,977 | 20,821 | 18,673 |
How much operating cash is other people's money held temporarily. The two deferred revenue lines are worth $4,642 million together, of which $4,592 are customer prepayments on contracts with a significant financing component, a line worth zero in both prior years. The prepayments alone are 14.4% of operating cash flow, and together with the other deferred revenue line 14.5%. This is not a ratio to free cash flow, because free cash flow is negative: removing the prepayments alone, operating cash would be $27,385 million and free cash flow −$28,278 instead of −$23,686, and removing both lines $27,335 and −$28,328. This is money the customer paid before delivery, which the document itself treats as financing — "we recognize interest expense related to significant financing components separately from revenue" — and which will release as revenue without further collections.
How far cash taxes are from income statement taxes. The tax provision is $2,467 million, cash taxes paid $3,704: cash goes out 50.1% in excess of the accrual. The difference is explained by the composition of the charge: the current portion is $3,384 million and the deferred portion is a $917 million benefit. The company pays on current income while recording a charge reduced by deferrals, and the stock-based compensation tax benefit of $2,062 million cuts the accrual far more than it cuts the year's cash outflows. The document also gives the jurisdictional split of payments: $2,460 million federal, $249 state, and among foreign a net refund of $262 million from Korea.
Whether the stated capital expenditure really covers the investment. It does not, and the gap is quantifiable in three directions. Cash capital expenditure is $55,663 million, but unpaid capital expenditure at year end rises from $2,970 million to $5,279: capital expenditure incurred in the year is therefore about $57,972 million, $2,309 more than the cash flow statement shows. To this are added $4,946 million of right-of-use assets obtained through finance leases and $18,246 through operating leases, which is capacity acquired without cash outlay for $23,192 million in all. Summing these two items, capacity acquired in the year exceeds cash capital expenditure by $25,501 million. A third item does not add but has to be named: $3,345 million of "short-term financing related to capital expenditures, net" appear in the financing section rather than the investing one. They are not additional capacity — the corresponding outlay is already inside the $55,663 million — but they say that part of the year's capital expenditure was paid for with short-term financing raised for that purpose. Who provided it the document does not say.
The threshold on working capital as the explanation of free cash flow growth does not apply here, because free cash flow did not grow: it went from −$394 million to −$23,686. The inverse observation does apply, and belongs among the weaknesses: 14.4% of the year's operating cash flow is customers' money, and without it the cash deficit would be $4,592 million larger.
Six calculations, with one caveat that applies to all. The balance sheet covers two years: for FY2024 the statement of equity gives the net figure and the cash flow statement gives cash, but that year's lease liabilities appear nowhere, and without them FY2024 invested capital cannot be rebuilt on the same basis as the other two. Everything that requires it therefore exists for two years only, and two points are not a trend.
Per-share values. Computed on each year's weighted average diluted share count.
| Per share (US$) | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Revenue | 23.11 | 20.03 | 18.76 |
| Net income available to common | 5.83 | 4.34 | 3.71 |
| Free cash flow | (8.13) | (0.14) | 4.18 |
| Common equity | 12.89 | 7.14 | 3.08 |
The FY2024 equity per share is not shown on any line of the document: it is derived from the statement of stockholders' equity, which gives $9,239 million of total equity of which $535 is noncontrolling interests, that is $8,704 attributable to Oracle, divided by 2,823 weighted average diluted shares.
Revenue per share grows 15.4% against total revenue at +17.3%: the difference, 1.9 points, is dilution. Earnings per share grow 34.3% against net income at +37.3%, and again the gap is dilution. The shareholder has not gone backwards on either measure, but free cash flow per share goes from +$4.18 to −$8.13 in two years, and on that measure has gone backwards by $12.31 a share.
Return on incremental capital. Between the only two years available, the increase in NOPAT divided by the increase in invested capital, on the same definition and the same tax rate used for the ROIC in section 3, gives 4.13%. It is a single point and not a trend, but it says something precise: of the $59,876 million of additional invested capital deployed in the year, the return produced so far is $2,471 million of NOPAT. A total ROIC of 10.1% alongside an incremental of 4.1% describes a company diluting the return of the annuity it built in the past with new capital that does not yet earn. The benign reading is that the capital has only just arrived and the corresponding revenue has yet to follow, and the $638 billion of remaining performance obligations give that substance. The severe reading is that the number is what it is, and that remaining obligations are not yet cash.
Reinvestment rate and implied growth. The reinvestment rate is 234.5%: the company is deploying more than twice its own NOPAT into new capacity, funding the difference with debt. Multiplied by the 10.1% ROIC it gives implied growth of 23.6%, against actual operating income growth of 16.6%. Here the realised figure is lower than the implied one, not higher: there is no one-off item to explain, there is an investment that has not yet produced the income that return presupposes. How much of its earnings the company can redeploy at that return is the question the document leaves open, because a reinvestment rate above 100% cannot by definition be funded from earnings.
Self-funding. From the financing section of the cash flow statement, over the three years available: shares issued net of repurchases and tax withholdings are +$1,243 million in FY2026, −$847 in FY2025 and −$2,500 in FY2024, for a three-year balance of −$2,104 million; debt issued net of repayments is +$40,211, +$7,018 and −$3,667 million, for a three-year balance of +$43,562. To these are added $4,954 million of preferred stock in FY2026. Cumulative free cash flow over the same three years is negative by $12,273 million, and dividends paid are $14,921. The company has not funded its growth internally: it has raised $48.5 billion net between debt and preferred capital in three years, and depends on the availability of the bond market to continue.
Capital intensity. Cumulative capital expenditure over the three years is $83,744 million against cumulative net income of $39,997: $2.09 invested for every dollar earned. The ratio of capital expenditure to depreciation and amortisation goes from 1.12x in FY2024 to 3.44x in FY2025 to 5.99x in FY2026. Consistently and increasingly above 1 means the company is expanding capacity, not maintaining it, and the gap between the two measures is why current depreciation understates the future consumption of capital.
Operating return on enterprise value. 2.71% on the enterprise value computed with debt at carrying value, 2.76% using fair value. It is what a buyer of the whole company would earn before capital structure and before tax surprises, and it is the only multiple that stays readable when net income contains a $2.7 billion disposal gain and free cash flow is negative.
On research productivity: cumulative research and development over the three years is $29,047 million, expensed in full, because the note declares capitalisable software development costs not material in all three years, against revenue growth of $14,396 million over the same period. Every dollar of research is accompanied by 50 cents of additional revenue over the three years, but the relationship is not causal: in these three years the growth comes from infrastructure, and infrastructure is built by capital expenditure, not by research.
Comparisons the income statement does not show. For each, the two growth rates side by side and the gap in percentage points.
| Comparison | Growth A | Growth B | Gap |
|---|---|---|---|
| Net trade receivables against revenue | +21.3% | +17.3% | 4.0 pp |
| Allowance for credit losses against gross receivables | −2.7% | +19.9% | 22.6 pp |
| Accounts payable against direct costs | +114.7% | +36.0% | 78.7 pp |
| Revenue against operating cash flow | +17.3% | +53.6% | 36.3 pp |
Inventory has no line of its own on the balance sheet, even though the MD&A mentions "the impact of periodic changes in inventory valuation" among hardware costs: the balance is not available and the comparison is not computable. On capitalised costs there are two delimitations rather than an absence. Capitalisable software development costs, Note 1 states, "were not material to our consolidated financial statements in fiscal 2026, 2025 and 2024": they are not zero, they are declared immaterial. Sales commissions deferred over an average four-year benefit period have no disclosed balance, but they are included in "other current assets" and "other non-current assets", $4,288 million and $11,743, which are their ceiling. The comparison between capitalised and expensed cost remains uncomputable, and the reason is that the numerator is missing, not that the phenomenon does not exist.
Three gaps exceed five points and must be flagged explicitly.
The allowance for credit losses falls from $557 million to $542, that is by 2.7%, while gross receivables grow 19.9%: coverage goes from 6.11% to 4.96% of gross receivables. An allowance thinning while receivables grow is earnings borrowed from the future, and the circumstance has to be read alongside what the document writes elsewhere about credit risk: "our business is, and may continue to be, exposed to risks of customer non-payment and non-performance" and "some of our customers may be highly leveraged". The document does not quantify the income statement effect of the reduction.
Accounts payable more than double while direct costs grow 36.0%, and days payable go from 110 to 174. The reading here, though, is not the usual one. The main cause is identifiable: unpaid capital expenditure at year end rises from $2,970 million to $5,279, and the increase in payables is largely infrastructure bought and not yet settled, not a lengthening of payment terms to current suppliers. What remains is that $5.3 billion of investment was made and not paid for by the closing date.
The fourth comparison has the opposite sign at Oracle from the usual one: operating cash flow grows three times faster than revenue. It is not a sign of deteriorating revenue quality, it is the result of a doubling of depreciation and of $4.6 billion of customer prepayments. The divergence belongs among the weaknesses all the same, because operating cash flow that grows on rising non-cash costs and other people's money is operating cash flow that no longer measures current profitability.
Trade receivables grow four points faster than revenue, below the five-point threshold, and days sales outstanding go from 54.4 to 56.3: not a signal.
The sector is technology and enterprise software, with a growing cloud infrastructure component. Two standard metrics of this report are not meaningful and must be declared as such. The cash conversion cycle is not, because there is no inventory and because support contracts are collected in advance: working capital turnover does not describe a production cycle. The free cash flow yield is not, in this year, because the flow is negative and expressing it as a percentage of the price would not be a measure of return.
The sector metrics the document provides are three — the recurring share, deferred revenue with remaining performance obligations, and gross margin by line — and the table below gathers them all.
| Sector metric | FY2026 | FY2025 | FY2024 |
|---|---|---|---|
| Cloud + software support (US$ mn) | 53,793 | 44,029 | 39,383 |
| Share of total revenue | 79.9% | 76.7% | 74.4% |
| Total deferred revenue (US$ mn) | 15,395 | 10,733 | not available |
| Remaining performance obligations (US$ bn) | 638 | 138 | not available |
| Gross margin — cloud and software | 69.9% | 76.5% | 78.8% |
| Gross margin — hardware | 71.9% | 73.4% | 70.9% |
| Gross margin — services | 20.7% | 12.6% | 11.2% |
The recurring share cannot be isolated precisely because hardware support is inside the hardware line without being separated; the sum of cloud and software support, which is recurring by contractual definition, is 79.9% of revenue and has grown 5.5 points in two years.
The renewal rate is not disclosed numerically. The document states that "substantially all software support customers renew their support contracts with us upon expiration", which is a qualitative statement and not a percentage: it should be recorded as such.
Billings against revenue are computed as revenue plus the change in deferred revenue, and are $72,019 million in FY2026. The comparison with the prior year is not possible, because the document gives total deferred revenue for two years only and the balance at 31 May 2024 is missing. The figure that replaces the comparison is more informative anyway: remaining performance obligations go from $138 billion to $638 billion, that is, contracted revenue not yet recognised has become 9.5 times annual revenue against 2.4 times a year earlier. It should be read with the caution the document itself suggests: the increase is attributed to "certain significant cloud contracts that were entered into during the period", without saying how many they are or who signed them, and the 12% expected within twelve months means that 88% depends on counterparties' ability to honour multi-year commitments.
The metric the document does not provide, and that the sector would make relevant, is data centre capacity utilisation. With $39,973 million of construction in progress and $260 billion of lease commitments not on the balance sheet, how much of the installed capacity is sold decides what those commitments are worth, and the document does not address it in any form. It is a level of disclosure below what the model would warrant, and it should be recorded as such.
The risks that follow come from the document's risk factors and notes, ordered by severity, distinguishing those already realised from those still potential.
$273 billion of capacity commitments off the balance sheet, $292 billion including those entered after year end (already assumed, effect potential). $260 billion of additional leases commencing between FY2027 and FY2029 with terms of fifteen to nineteen years, plus $13.3 billion of unconditional purchases at the reporting date, plus $19 billion assumed after the close. The document states the mechanism that makes them dangerous: the terms and pricing adjustments of the lease contracts "typically do not align with the duration and pricing of customer contracts", and if a customer does not renew the capacity may not be re-leasable "on acceptable terms, if at all". They are fixed commitments against revenues that are not.
$129.5 billion of debt with a rising marginal cost (already realised). The document lists it among the risks with the figure: "we had an aggregate of $129.5 billion of outstanding indebtedness that will mature between calendar year 2026 and calendar year 2066". Interest expense grows 28.5% to $4,599 million and absorbs 22.3% of operating income. The year's issuance carries coupons up to 6.85%, against a pre-existing portfolio whose lowest coupon still outstanding is the 2.30% note due March 2028: every refinancing at current terms raises the average cost, and the document writes that "if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase". Over the next two years $17,355 million falls due.
Free cash flow negative by $23.7 billion (already realised). It is the measure the company itself publishes. The document states that the increase in capital expenditure will continue: "we expect this upward trend to continue during fiscal 2027 and in the following fiscal years". A cash deficit that repeats and grows has to be funded, and the sources the document lists are the same three as this year: debt, preferred stock, at-the-market equity.
Concentration on large infrastructure customers (potential, not quantified). The document writes that "in certain OCI offerings, we are more concentrated among a number of large customers" and that "some of our customers may be highly leveraged and subject to their own operating and regulatory risks". At the same time it states that no customer exceeded 10% of total revenue in any of the three years. The two statements coexist because the concentration sits in the new and small part of revenue, which is however the part that justifies the capacity commitments. The document gives no figure at all on concentration in infrastructure, and that is a gap bearing directly on what those commitments are worth.
$10.1 billion of gross uncertain tax positions, growing for three years (already realised, outcome potential). The auditor's only critical audit matter. $4.9 billion would affect the rate if recognised; accrued interest and penalties are $2.7 billion; open examinations cover US returns through FY2024 and a list of twelve foreign jurisdictions. The document states its belief that the outcome will not be material, and gives no sensitivity.
Dependence on power and on third parties for capacity (potential, declared as already encountered). The document writes that it has already met difficulties: "we have faced, and may continue to face, challenges with securing reliable and cost-effective power sources for our data center energy demands, which are constrained globally". The unconditional purchase obligations, $13,309 million, are "primarily related to data center power arrangements". And the group's approximately 181 data centres are "substantially all" leased from third parties, whose ability to obtain financing and build on schedule the document identifies as outside its control.
Securities class action over the cloud infrastructure business (potential, not quantified). Filed on 3 February 2026 in Delaware against the company, the two chief executives, the chief technology officer, two other executives and one director, over allegedly false statements about the cloud business. No accrual, no range of loss, no estimate disclosed. The procedural calendar the document reports runs to 18 December 2026.
413 million shares of the largest shareholder pledged (already realised). The proxy states that at 21 September 2026 Lawrence Ellison had pledged 413 million Oracle shares to secure personal indebtedness, out of a holding of 1,158 million shares equal to 38.2% of the capital. The governance committee believes there is no material risk; the fact remains that 13.6% of the company's capital, on the proxy's own basis, is collateral for one individual's personal loans, and that company policy forbids pledging by directors and officers with two exceptions only, one of which is by name.
Dutch privacy litigation with a claim scaled to the population (potential, not accrued). The claimant seeks €500 of immaterial damages for each Dutch internet user, plus material damages and costs. On 30 January 2026 the Advocate General recommended that the Supreme Court dismiss Oracle's grounds. No accrual.
Depreciation set to rise (mechanical, already determined). $39,973 million of construction in progress does not depreciate. With the six-year useful life disclosed for servers, its entry into service adds about $6,662 million of annual depreciation, 32.3% of the year's operating income. This is not a scenario risk: it is an arithmetic consequence of investment already made, whose only uncertainty is when it shows up.
What emerges is not a company that is fragile on the income statement, which stands at a 30.6% operating margin with $20.6 billion of profit. It is a company that has turned a low-capital model into an extremely capital-intensive one, funded it with debt, and taken on fixed multi-year commitments against revenues the document itself describes as misaligned in duration and in price.
The comparison is not possible in the form required. The document does not state which risk factors were added or removed relative to the prior year, and the FY2025 10-K was not supplied to this analysis. Reconstructing last year's list from memory would mean inventing it, and this report does not do that.
Three risk factors are nonetheless worth flagging for their content, without attributing to the document a claim of novelty it does not make. The first concerns the at-the-market equity programme and the mandatory convertible preferred stock, which describes instruments created in February 2026 and therefore could not have existed before. The second concerns data centre capacity, and contains the sentence on the mismatch between lease duration and customer contract duration that is the central risk of this balance sheet. The third concerns artificial intelligence products, and declares significant investments "in infrastructure and headcount" without quantifying them at that point. Elsewhere the document bounds them in part: the MD&A attributes $5.7 billion of the constant-currency cost increase to infrastructure and separately quantifies $132 million of higher computer equipment expenses within research and development. What does not exist is a line separating artificial intelligence spending from the rest.
Who controls Oracle, and with what rights? There is a single class of stock, one vote per share, but concentration makes the question of de facto control less open than the structure suggests.
At 21 September 2026, the record date for the annual meeting, Lawrence Ellison held 1,158,375,174 shares, 38.2% of the capital, and all directors and officers together 38.4%. He is the founder, executive chair of the board and chief technology officer, and signs the 10-K in that capacity. Of those shares, 413 million are pledged as collateral to secure personal indebtedness, including various lines of credit. Company policy on pledging forbids directors and officers from pledging Oracle shares, with two declared exceptions, one of them by name: "Mr. Ellison may continue to pledge Oracle securities as collateral to secure or guarantee indebtedness, but he may not hold Oracle securities in a margin account". The governance committee reviews the exposure every quarter and believes it poses no material risk, in part because the secured loans are personal rather than margin accounts and in part because "the Board believes that Mr. Ellison has the financial capacity to repay his personal term loans without resorting to the pledged shares". No other officer or director holds pledged shares.
The board, if the nominees are elected, will have thirteen members, five of them non-independent — Ellison, Magouyrk, Sicilia, Catz and Henley — and eight independent. Every member of the compensation, finance and audit, governance and independence committees was independent during FY2026. Two directors, Conrades and Seligman, retired in January 2026. Directors stand for election every year and the board is not staggered.
The auditor is Ernst & Young, which states it has served the company since 2002; the document does not specify which was the first audited year, so the number of years is not derived here. FY2026 fees are $41,745,974 in total, of which $37,491,069 for the audit, $4,043,157 for audit-related services, $200,548 for tax advice and $11,200 for other. Audit fees grow 23.6% against $30,323,147 in FY2025, while tax fees fall 82.1%. The finance and audit committee pre-approved all engagements.
On related-party transactions the proxy is detailed and the perimeter is small relative to the company: related-party revenue is about 0.06% of total revenue and related-party costs about 0.03% of operating expenses. Sales to entities connected to Ellison are about $32.2 million in FY2026, of which $21,973,148 to the Ellison Institute alone; purchases from entities connected to Ellison or his son are about $10.4 million, of which $7.5 million to the F50 sailing league owned by Ellison, against a sponsorship package valued at about $10 million a year and Oracle products supplied to the league worth about $1.5 million. There is a written price protection agreement with Ellison, under which he reimburses the difference if Oracle shows the same good or service was available at a lower price.
On compensation, the compensation document was supplied to this analysis and the next section treats it with its own figures.
Capital allocation. Over the three years in the document the money went to one place. Cumulative capital expenditure is $83,744 million, dividends $14,921, share repurchases $1,897 in cash and tax withholdings on vested shares $3,051. The cash flow statement shows $1,897 million of cash paid for repurchases and the equity note $1,893 million as the cost of shares repurchased: the $4 million difference is the settlement timing, and the calculations in this report use cash except where the average price per share is needed, which comes from the note. Acquisitions are essentially absent: goodwill moves by $54 million in FY2026 and −$23 in FY2025, both changes attributed by the note to currency translation, and no impairment of goodwill or intangibles was recorded in any of the three years. The funding came from $43,562 million of net new debt and $4,954 million of preferred stock. In short: capital was borrowed and put into data centres, and the amount that went out to shareholders, $19,869 million in dividends, repurchases and withholdings over three years, was funded by that same borrowing in the two years when free cash flow was negative.
Share repurchases. In FY2026 Oracle repurchased 0.4 million shares for $93 million, against 3.9 million for $600 million in FY2025 and 10.6 million for $1,200 million in FY2024. The average prices paid in the two prior years are $153.85 and $113.21 a share, computed on quantities disclosed to one decimal place. For FY2026 the same calculation gives $232.50, but the quantity is disclosed as 0.4 million shares and the result therefore lies in a range between about $206 and $267: the document does not allow one to say whether the repurchase happened above or below the closing price of $225.78. On an amount of $93 million the economic effect is negligible in any case. $6.3 billion of authorisation remains available and there was no repurchase activity in the final quarter.
Net dilution. In FY2026 72 million shares were issued for compensation plans and 1 million for the employee purchase plan; 0.4 million were repurchased under the programme and an unstated number for tax withholdings, for $111 million. The balance is an increase of 73 million shares, from 2,807 to 2,880, 2.6% of the opening share count. The repurchase, $93 million, covers 1.9% of the year's stock-based compensation of $4,811 million. The repurchase is not returning capital and is not plugging the dilution either: for every fifty dollars of stock handed to employees, one was bought back. The company measures the same thing more favourably and it should be reported: the MD&A discloses cumulative potential dilution since 1 June 2023 of 1.0% a year and maximum potential dilution from all outstanding awards of 3.5%. The two measures do not contradict each other — the company's is net of forfeitures and measured on grants, this report's is the actual movement in shares outstanding — but the second is the one the shareholder experiences.
Accounting aggressiveness. Oracle excludes three items from its adjusted measures: amortisation of acquired intangibles, restructuring and other expenses, and stock-based compensation. Summed over the three years in the document, before tax, they are $23,377 million, 58.4% of cumulative net income over the same period. The item that most deserves attention is restructuring: $718 million in FY2024, $374 in FY2025, $1,838 in FY2026, for $2,930 million in all. A "non-recurring" item that recurs in all three comparative columns is recurring, and the FY2026 plan contemplates total costs of up to $2.1 billion of which $1,804 million is already accrued. Stock-based compensation, $13,459 million over the three years, is the largest exclusion and the least defensible: it is a cost the company incurs every year and which in FY2026 produced 73 million new shares.
Governance signals inside the document. The opinion on internal control is clean, with no material weaknesses, both in management's assessment and in Ernst & Young's separate report. There are no restatements of prior financial statements and no change of auditor: EY has been in place since 2002. The proxy discloses one formal irregularity, two transactions for each of the two chief executives reported a day late through an administrative error. Ellison's pledged shares are dealt with above. One element deserves to sit alongside the others: the document adopted the new tax disclosure standard prospectively, and the result is that the FY2026 rate reconciliation is presented in a far more detailed form than FY2025 and FY2024, which remain in the old format. The three columns are not comparable line by line, and the document does not restate them.
Compensation and incentives. The proxy is attached and allows an answer. The cash bonus for senior executives is built on a single metric: year-over-year growth in non-GAAP operating income, defined by the plan as "operating income, excluding stock-based compensation expenses, amortization of intangible assets and restructuring and other expenses". Those are exactly the three items the company excludes from its adjusted measures in the financial report. The overlap is total and must be written: management is rewarded on an income figure stripped of the same three items the company strips out when it describes its own results, and one of those three — stock-based compensation — is the pay itself. In FY2026 operating income so defined grew by $3,893 million, from $25,033 to $28,926, and produced bonuses equal to 97% of target. The plan provides that if that income does not grow nothing is paid, and the committee may reduce but not increase the formula outcome; it did so in FY2025, zeroing the bonuses of all participants.
The equity component is of a different scale from any line in the compensation income statement. In the year of the transition at the top the committee granted Clayton Magouyrk a one-time equity award with a target value of $250 million and Michael Sicilia one of $100 million, alongside $50 million to Ellison and $26 million to Hilary Maxson, of which $15.6 million in options and the rest in restricted stock; the accounting value recorded for the options component alone, higher than the target value because of the volatility inputs in the valuation model, is respectively $621,669,237, $248,667,656, $117,777,832 and $30,925,771. Magouyrk's total FY2026 compensation is $627,472,419. The options granted to Magouyrk, Sicilia, Ellison and Mark Hura had no intrinsic value at 31 May 2026, because the exercise prices — $308.46 for the two chief executives and $280.07 for the other two — exceeded the closing price of $225.78: they need 36.6% and 24.0% of appreciation respectively to be worth anything. Maxson is the exception, hired in April at an exercise price of $185.35, whose options were worth $13,611,245 at year end. The committee states that it took no compensating action for the others.
A fifth of the grants is in options conditional on a three-year target, and that is where the proxy says what the board expects of the company: the options vest on FY2028 non-GAAP total revenues, with a threshold at $100 billion, a target at $125 billion and a maximum at $250 billion. Starting from the $67.4 billion of FY2026, the target requires compound growth of 36.2% a year for two years, and the threshold 21.8%. The maximum requires quadrupling FY2025 revenue in three years. The proxy states that at 31 May 2026 the performance options remain entirely unearned.
In this document does management admit an error, a project closed, a target missed, a write-down, a forecast revised downwards?
In the financial report, no. Management's commentary describes growth and attributes its causes, and where the numbers worsen it uses the neutral form: the cloud and software segment margin falls four points and the accompanying sentence is that expenses increased "primarily due to a $5.7 billion increase in infrastructure expenses", without the fall in margin being named. The free cash flow negative by $23.7 billion is published in a table, with the line "free cash flow as percent of net income" at −139%, and is not commented on in a single sentence. Total operating margin is described as having "remained flat", which is accurate.
Outside the financial report, and only in part, yes. The FY2026 restructuring plan is declared for what it is, with the amount, the purpose and the cause: "to implement certain strategic measures and further improve operational efficiencies, including through the adoption and integration of AI technologies across certain functions". The plan carries $1,804 million of costs accrued to date out of an expected total of $2,103, and the company writes openly that one of the reasons is the adoption of artificial intelligence in its own functions. How many people it concerns the document does not say, and the year-end headcount remains about 141,000. It is an admission of overstaffing, written without euphemism.
The other admission is in the proxy, not the financial statements, and concerns the share price: "Oracle's strong fiscal 2026 operating performance was not fully reflected in its stock price performance during the fiscal year". The company attributes it to "broader investor concerns affecting the software, AI and cloud sector", that is, to the market and not to itself. On the same page, though, it publishes the table showing four of the five option packages underwater, and states that it did nothing to remedy it. Putting in writing that your own incentives are worth nothing is information a reader can use. The claim about the price is in any case testable against the 10-K, whose five-year total return table takes Oracle from 222.7 to 306.8 in FY2026, +37.8%, against +29.8% for the S&P 500 index and +57.6% for the technology index: in the year the stock beat the broad market and lost against its own sector.
One omission weighs more than those admissions. The document discloses $260 billion of lease commitments not on the balance sheet in a note, without a line of commentary in management's discussion, without saying which customer contracts they correspond to and without any analysis of their sustainability. A figure four times annual revenue appearing only in a note is not reticent accounting — the disclosure is formally complete — but it is not candour either: it is the minimum required, placed where fewer people will read it.
There is one change of accounting principle in the year and the document declares it: in FY2026 the US standard on income tax disclosures was adopted prospectively, requiring the rate reconciliation by category and the jurisdictional split of cash taxes paid. Prospective adoption means FY2026 is presented in the new format and the two prior years in the old one: the three reconciliation columns are not comparable line by line, and that has to be kept in mind before reading any trend in the composition of the rate. There are no restatements. Reclassifications there are: Note 1 states that it reclassified "certain prior year amounts and balances and their related disclosures to conform to the current period's presentation for all periods presented", specifying that they did not affect revenue, operating income or net income. The document does not say which items were moved.
The auditor's critical audit matter is one, uncertain tax positions, and it coincides with the only critical accounting estimate management declares. Both point to the same note, treated in section 3-bis.
The accounting choices that move income are three and all identifiable. The first is the six-year useful life of servers, disclosed in the note: with $59,634 million of historical cost in computers and networking equipment and $39,973 under construction, one year more or less of useful life is worth billions of annual depreciation, and the document gives no sensitivity. The second is lease classification: $29,690 million of right-of-use assets are operating and $7,464 finance, and the difference determines whether the cost passes as a single rental charge or as depreciation plus interest, that is, whether it enters EBITDA and interest coverage or not. The third is the deferral of sales commissions over an estimated four-year average benefit period, with the estimate of that period left to management; the document does not disclose the deferred balance, so the effect is not measurable from outside.
On the difference between GAAP and non-GAAP measures the document is explicit and complete: it excludes amortisation of intangibles, restructuring and other, and stock-based compensation, for $8,320 million before tax in FY2026 and $7,355 in FY2025, and it states that the same adjustments take the effective tax rate from 12.6% to 19.9% in FY2026 and from 12.1% to 19.7% in FY2025. That the company also publishes the adjusted rate is a point of transparency; that the same definition is the one on which senior executives' bonuses are computed is a point of conflict, and it is dealt with in section 5-bis.
The effective rate is 12.6% against a 21% federal statutory rate, and the reconciliation says why. Tax credits are worth −8.1 points, non-taxable or non-deductible items −10.1 points of which −10.6 from stock-based compensation alone, foreign effects −0.4 points net, while the US tax act of July 2025 adds 4.8 points and the change in unrecognised tax benefits 4.3. The decisive line is therefore the tax benefit on stock-based compensation, which depends on the share price at vesting rather than on a company decision, and which the document itself identifies as a factor that could worsen future rates.
The earnings quality of FY2026 has to be read with three elements in mind, none of them irregular and all three identifiable from the document: $2,700 million of gain on the Ampere disposal, which is cash but is not repeatable; $2,062 million of tax benefit from stock-based compensation, which is not a decision; and a depreciation charge that the property note shows to be low relative to the future one, because a third of historical cost is not yet in service. Stripping the first two, normalised net income would be about $12,665 million, that is 74.1% of the reported figure.
$638 billion of remaining performance obligations, against $138 billion a year earlier. The document states it expects to recognise 12% over the next twelve months, about $76.6 billion, against FY2026 revenue of $67.4 billion. A further 34% is expected between month 13 and month 36. It is contract already signed: the variable is not demand but the ability to deliver and the solvency of the counterparties.
Cloud infrastructure grows 76.9% and overtakes applications. $18,101 million against $15,888, and for the first time among the years in the document infrastructure is the larger cloud line. It contributed 84% of constant-currency cloud growth.
$39,973 million of capacity under construction, not yet productive. Construction in progress is 32.6% of gross historical cost and does not yet generate revenue. Its entry into service is the mechanism through which remaining obligations become revenue, and the document states that capital expenditure will keep growing in FY2027 to increase existing capacity and open new geographies.
$1,671 million of intangible amortisation falling to $731 in FY2027. The note gives the schedule: $731 million in FY2027, $694 in FY2028, $620 in FY2029. That is $940 million of cost leaving the income statement next year without anything changing in the business, worth 1.4 points of operating margin on FY2026 revenue.
A restructuring plan almost complete. The FY2026 plan contemplates total costs of up to $2,103 million, of which $1,804 already accrued: less than a sixth remains to be incurred. If the savings are real, the charge leaves the income statement while the savings stay.
$6.3 billion of repurchase authorisation and a $20 billion at-the-market equity programme, unused. They are two opposite levers, both available and neither used in FY2026: the first would return capital, the second would raise it. Which of the two is pulled will say, more than any statement, how management judges its own price.
None of these six points rests on an assumption outside the document. None of the six, however, bears on the variable that decides the thesis, which is the relationship between capacity committed for the next fifteen years and the revenue that capacity will produce.
The comparison is possible only for the commitments the document reports in its comparative columns and notes. The FY2025 10-K was not supplied, so targets stated last year and not repeated here are not verifiable and are not reconstructed.
| Item | Stated | Delivered | Variance |
|---|---|---|---|
| FY2024 restructuring plan | substantially complete by 31 May 2025 | complete; $432 million in FY2024 and $314 in FY2025 | none |
| FY2026 restructuring plan | total costs of up to $2,103 million | $1,804 million accrued to date, $1,838 through the income statement in the year | $299 million still to be incurred |
| Term Loan Credit Agreement 2: 1.25% quarterly amortisation to June 2026 | $281 million of repayment expected in FY2026 | balance from $5,419 million to $5,137, that is $282 | none |
| €750 million 3.125% notes due July 2025 | repayment at maturity | "repaid in full upon maturity in July 2025" | none |
| $6.0 billion revolving facility maturing March 2027 | in place | replaced on 6 March 2026 by a $10.0 billion facility maturing March 2031 | enlarged and extended |
| Commercial paper programme | raised to $10.0 billion on 6 March 2026 | $1,468 million outstanding at 31 May 2026 | 14.7% of the programme used |
| Covenant on EBITDA / net interest expense ≥ 3.0 | to be met at the end of each quarter | "We were in compliance with all debt-related covenants at May 31, 2026" | met |
| Repurchase programme | $6.3 billion available, no expiry | $93 million used in FY2026, no activity in the final quarter | no stated target to compare |
| $20 billion at-the-market equity programme | established 2 February 2026 | "we have not sold any shares of our common stock under the ATM Program" | unused |
| Common dividend | $1.70 per share in FY2025 | $2.00 in FY2026, plus $0.50 quarterly declared in June 2026 | +17.6% |
| Margin, capital expenditure or volume targets | the document states none | — | comparison not possible |
Two lines deserve a reading. The first is the term loan: the repayment prescribed by the contract, $5,630 million of initial commitment at 1.25% quarterly, gives $281.5 million in the year, and the balance fell by $282. The contract specified the amount a year in advance, and it was paid to the million. The second is the at-the-market equity programme: established in February, unused by May, still available for $20 billion. A company that in the same year issues $43 billion of bonds, $5 billion of preferred and equips itself with the ability to sell $20 billion of shares without exercising it has built three funding channels and used two.
If three years from now this investment had produced a permanent loss of capital, what must have happened? Three mechanisms, all built on figures from the document.
First: the committed capacity stays and the revenue does not. The document describes the mechanism in its own words: the terms, renewal options and pricing adjustments of the data centre leases "typically do not align with the duration and pricing of customer contracts", and if customers do not renew, the capacity may not be re-leasable "on acceptable terms, if at all". To this is added that in certain infrastructure offerings the company is "more concentrated among a number of large customers" and that some of those customers "may be highly leveraged". The figure that measures it today is the ratio between the $273 billion of commitments not on the balance sheet at the reporting date, over terms of fifteen to nineteen years, and the $76.6 billion of remaining obligations the document expects to convert into revenue over the next twelve months. The observable signal that would anticipate it is the percentage of remaining obligations expected within twelve months: today it is 12%, and a fall in that share at an unchanged total would mean contracts lengthening or stalling.
Second: the depreciation arrives before the revenue. The mechanism is arithmetic and already determined. At 31 May 2026 accumulated depreciation is 18.5% of gross historical cost against 26.9% the year before, and $39,973 million of assets are not yet in service. With the six-year useful life disclosed for servers, that capacity entering service adds about $6,662 million of annual depreciation, 32.3% of FY2026 operating income, and to that are added the interest costs on the debt raised to fund it. If the corresponding revenue arrives one or two years late, the operating margin compresses in the meantime without anything having gone wrong commercially. The figure that measures it is that 18.5%; the observable signal is depreciation as a percentage of revenue: on property alone it goes from 5.9% in FY2024 to 6.7% in FY2025 to 11.3% in FY2026, and together with intangibles from 11.6% to 10.8% to 13.8%.
Third: the cost of debt exceeds the return on the capital it funds. The mechanism lies in the comparison of two numbers from the document: the return on invested capital is 10.1% and the return on incremental capital 4.1%, while the bonds issued in the year pay up to 6.85% and the disclosed fair value of the debt is $13.7 billion below carrying value. As long as new capital earns less than the debt funding it costs, every billion invested destroys value, and the document expects to invest more. The figure that measures it is the gap between 4.1% and the marginal cost of debt; the observable signal is the ratio of interest expense to operating income, today 22.3% against 20.2% the year before, together with the terms of the next issues.
No probability is assigned to these scenarios, because the document provides no basis for estimating one.
What is left for the shareholder if growth stops?
| Item | Total (US$ mn) | Per share (US$) |
|---|---|---|
| Oracle Corporation stockholders' equity | 42,508 | 14.76 |
| Tangible equity | (22,982) | (7.98) |
| Tangible equity attributable to common | (27,936) | (9.70) |
| Net working capital | 4,803 | 1.67 |
| Current ratio | 1.115x | — |
| Cash and marketable securities | 31,894 | 11.07 |
| Cash less gross debt (finance leases included) | (105,348) | (36.57) |
| Share of assets measured on observable prices | 9.2% | — |
| Share measured on internal Level 3 estimates | none | — |
Per-share values are computed on the 2,880,471,000 cover-page shares at 12 June 2026.
Tangible equity is negative by $22,982 million, and removing the preferred stock, which ranks ahead on liquidation, the figure attributable to common is negative by $27,936, that is −$9.70 a share against a price of $225.78. The reason is that goodwill, $62,261 million, exceeds equity on its own by $19,753. The current ratio is 1.115x and net working capital $4,803 million, a figure the MD&A reports in the same form: it is positive, but only just, and inside current assets sit $31.9 billion of liquidity freshly raised on the bond market. Net of gross debt, liquidity per share is negative by $36.57.
The document also states that 45% of office space, 11.9 million square feet out of 26.3, is sublet or being marketed for sublease or disposition: it is a clue about the realisable value of non-productive property, and the document attaches no value to it.
If revenue stopped growing and margins returned to the average of the three available years — an operating margin of 30.1% — the item that would protect the shareholder is current operating income, $20.6 billion on a recurring revenue base worth 79.9% of sales, because it services the debt and covers interest 4.48 times. The item that would not protect is equity: it is negative net of intangibles, and in a scenario where growth stops there would remain $273 billion of fixed commitments against capacity to be filled. No liquidation value is estimated: the document does not provide one.
The numbers in this document describe two companies superimposed. The first sells licences and support, is worth about a third of revenue, does not grow, and produces a margin the company built over thirty years. The second sells computing capacity, grows 77%, and to grow has required $55.7 billion of investment in a year, $43 billion of new bonds and $273 billion of multi-year commitments that do not appear on the balance sheet. The consolidated income statement is the first company's; the cash flow statement and the balance sheet are the second's.
At $225.78 the market capitalises the common stock alone at $650,353 million, that is 38.3 times income available to common and 9.66 times revenue. Enterprise value, with debt at carrying value and preferred at liquidation preference, is $760,701 million, 36.9 times operating income: the operating return to a buyer of the whole company is 2.71%, while the bonds that same company issued in February pay 6.70% and 6.85% on the long maturities. It is the most severe comparison the document allows, and it requires no assumption: Oracle's debt yields two and a half times Oracle's equity, before tax and before growth.
The thesis holds under two conditions, and both are written in the document. The first is that the $638 billion of remaining obligations become revenue at the pace the company indicates and with counterparties that pay: the 12% over the next twelve months is $76.6 billion, more than a full year of sales, and the remaining 88% depends on multi-year commitments from customers the document describes as concentrated and in some cases highly leveraged. The second is that the return on new capital recovers: today the incremental figure is 4.1% on $59.9 billion of additional capital, and at that level reinvesting 234.5% of NOPAT consumes value instead of creating it.
The thesis does not hold if the depreciation on the $40 billion under construction arrives before the revenue meant to justify it, because that line alone is worth a third of current operating income; or if one of the large infrastructure customers does not renew, because the document states it cannot guarantee re-leasing the capacity "on acceptable terms, if at all". At the 31 May 2026 price there is no margin of safety in the balance sheet: tangible equity attributable to common is negative by $27,936 million, cash net of debt is negative by $36.57 a share, and what protects the shareholder is only the old Oracle's ability to keep producing $20.6 billion of operating income while the new one is built.
Metrics to monitor in the coming quarters:
The first two measure the same fact from two sides — whether the capacity built is producing revenue — and it is that fact that decides the thesis.
Report based exclusively on Oracle Corporation's Form 10-K for the fiscal year ended 31 May 2026, filed with the SEC on 22 June 2026, and on the same company's proxy statement for the 2026 annual meeting. Multiples are computed on the closing price of US$225.78 on 31 May 2026, supplied to the analysis, and on the 2,880,471,000 common shares outstanding at 12 June 2026 shown on the cover of the 10-K. This report is for analytical purposes and does not constitute investment advice.
All amounts in US$ millions unless otherwise stated. The formulas are grouped by the section they come from.
The full data table behind this report — every line item with its source in the filing and the arithmetic checks — is published separately: Oracle FY2026 data table.