Cuộc họp công bố kết quả kinh doanh Q1 FY2027 của Oracle (ORCL): Doanh thu OCI tăng vọt 121%

Tập đoàn Oracle (NYSE: ORCL) công bố doanh thu quý 1 năm tài chính 2027 đạt mức kỷ lục khi việc triển khai nhanh chóng công suất OCI thúc đẩy sự tăng trưởng của hạ tầng đám mây. Ban lãnh đạo đã nâng dự báo doanh thu và EPS phi GAAP cho cả năm, đồng thời duy trì kế hoạch chi tiêu vốn ở mức cao.

Điểm tin chính

• Tổng doanh thu đạt mức kỷ lục 19,3 tỷ USD, tăng 30% so với cùng kỳ năm trước, trong khi EPS phi GAAP tăng 30% lên 1,92 USD.
• Doanh thu Hạ tầng Đám mây tăng 121% lên 7,4 tỷ USD, tăng tốc so với mức tăng trưởng 93% trong quý 4 khi Oracle đưa công suất megawatt kỷ lục vào vận hành.
• Nghĩa vụ thực hiện còn lại (RPO) đã tăng thêm 26 tỷ USD so với quý 4. Ban lãnh đạo dự kiến khoảng một nửa RPO sẽ chuyển thành doanh thu trong 36 tháng tới.
• Oracle đã cung cấp 850 megawatt công suất AI chứa hơn 300.000 GPU kể từ cuối quý 4. Mức độ sử dụng GPU trong quý 1 đạt 97,9%.
• Dòng tiền từ hoạt động kinh doanh đạt mức kỷ lục 23 tỷ USD, nhưng chi tiêu vốn 28 tỷ USD dẫn đến dòng tiền tự do âm 5 tỷ USD.
• Ban lãnh đạo đã nâng dự báo cho năm tài chính 2027 lên doanh thu ít nhất 90 tỷ USD, tương ứng mức tăng trưởng hơn 34%, và EPS phi GAAP đạt 8,10 USD.

Kết quả tài chính trọng yếu

Hiệu quả Hoạt động và Kinh doanh

Sự tăng trưởng của OCI được thúc đẩy nhờ việc triển khai công suất trung tâm dữ liệu và GPU mới, cùng với nhu cầu tiếp tục tăng đối với các dịch vụ tính toán và cơ sở dữ liệu. Theo ban lãnh đạo, Oracle đã cung cấp công suất AI trong quý 1 gấp gần 3 lần so với toàn bộ quý 4.

Công ty đã ký kết thêm hơn 30 tỷ USD các hợp đồng AI trong quý mà không yêu cầu thêm tiền mặt từ Oracle. Các cấu trúc tài trợ bao gồm khoản trả trước của khách hàng, thỏa thuận tự mang phần cứng và tài trợ từ nhà cung cấp. Ban lãnh đạo làm rõ rằng các cấu trúc này vẫn có thể bao gồm chi tiêu vốn nhưng làm giảm nhu cầu Oracle phải trả tiền mặt trước.

Mức độ sử dụng GPU vẫn duy trì ở mức cao 97,9%. Công suất đến hạn gia hạn trong quý 1 đã được gia hạn hoặc bán lại với mức giá cao hơn 20% so với các hợp đồng trước đó, dù hầu hết các GPU đó đã có tuổi đời ít nhất 4 năm.

Doanh thu Cơ sở dữ liệu Đa đám mây của Oracle đã tăng 353% so với cùng kỳ năm trước, trong khi số lượng khách hàng đa đám mây tăng 180%. Công ty đã hoàn tất việc mở rộng theo kế hoạch trên Azure và AWS, đạt 70 vùng cơ sở dữ liệu đa đám mây và 119 vùng sẵn sàng.

Về mảng ứng dụng, doanh thu SaaS tăng 10%, dẫn đầu là mức tăng trưởng 14% của Fusion và hơn 20% của các ứng dụng ngành. Oracle Health tiếp tục tăng tốc, trong khi sự tăng trưởng của NetSuite vẫn ở mức thấp hơn do chu kỳ quyết định của khách hàng chậm hơn trong năm tài chính trước.

Việc sử dụng AI tích hợp trong các ứng dụng của Oracle cũng được mở rộng. Khách hàng đã sử dụng các tính năng AI tích hợp hơn 150 triệu lần, tăng 42% so với quý trước. Các tác nhân AI của Oracle đã thực thi hơn 3,5 triệu lần trong môi trường vận hành thực tế, gần như tăng gấp đôi so với quý trước, trong khi số lượng tác nhân AI vận hành thực tế tăng 90% lên hơn 2.300.

Dự báo của Ban lãnh đạo

Triển vọng EPS quý 2 không bao gồm các khoản lợi nhuận liên quan đến Ampere được ghi nhận trong cùng kỳ năm trước. Ban lãnh đạo dự kiến mức tăng trưởng của Hạ tầng Đám mây sẽ tiếp tục tăng tốc trong phần còn lại của năm tài chính 2027 khi có thêm nhiều RPO chuyển hóa thành doanh thu.

Rủi ro và Các điểm cần theo dõi

Biên lợi nhuận gộp giảm đúng như dự kiến do chi phí gia tăng công suất trung tâm dữ liệu và tỷ trọng ngày càng tăng từ doanh thu hạ tầng có biên lợi nhuận gộp thấp hơn. Ban lãnh đạo cho biết biên lợi nhuận gộp có thể đi ngang sau đợt tăng công suất nhiều năm hiện tại, nhưng không đưa ra dự báo biên lợi nhuận cụ thể trong cuộc họp.

Cường độ vốn vẫn ở mức cao. Ban lãnh đạo không đưa ra mốc thời gian cụ thể để Oracle quay trở lại dòng tiền tự do dương, mặc dù cho biết các dự án hạ tầng riêng lẻ sẽ tạo ra dòng tiền mạnh mẽ ngay sau khi đi vào vận hành ổn định.

Các dự án trung tâm dữ liệu tại New Mexico và Wisconsin vẫn phụ thuộc vào quy trình xây dựng, cấp phép và cung cấp năng lượng phức tạp. Ban lãnh đạo cho biết cả hai dự án đang tiến triển và sẽ không ảnh hưởng đến dự báo doanh thu hoặc lợi nhuận cho năm tài chính 2027 đã đưa ra trước đó.

Giá linh kiện có thể tăng khi nhu cầu vượt quá nguồn cung. Oracle cho biết công ty đang điều chỉnh giá bán cho khách hàng tương ứng và hiện không dự kiến chi phí đầu vào cao hơn sẽ làm thay đổi khung biên lợi nhuận gộp trước đó.

Điểm nổi bật trong phiên Hỏi & Đáp với Chuyên gia Phân tích

• Chi tiêu vốn và tài trợ vốn: Ban lãnh đạo nhấn mạnh rằng sự tăng trưởng của OCI không bị giới hạn trực tiếp bởi chi tiêu vốn do Oracle tự tài trợ. Các khoản trả trước của khách hàng, tài trợ từ nhà cung cấp và cấu trúc tự mang phần cứng có thể hỗ trợ mở rộng mà không yêu cầu thêm tiền mặt trả trước từ Oracle.
• Dòng tiền tự do: Oracle không đưa ra ngày dự kiến quay trở lại dòng tiền tự do dương. Ban lãnh đạo cho biết các dự án hạ tầng đã đi vào vận hành ổn định có thể chuyển đổi khoảng 100% EBITDA sau thuế thành dòng tiền tự do, trong đó chi tiêu cho tăng trưởng tương lai vẫn là biến số chính.
• Triển khai trung tâm dữ liệu: Oracle cho biết kế hoạch công suất của họ được đa dạng hóa theo khu vực địa lý và các tổ hợp quy mô lớn sẽ đi vào hoạt động theo từng giai đoạn. Điều này giúp giảm sự phụ thuộc vào bất kỳ dự án hoặc ngày bàn giao đơn lẻ nào.
• SaaS và AI: Ban lãnh đạo dự kiến AI tích hợp, các tác nhân do khách hàng tự phát triển và việc triển khai có sự hỗ trợ của AI sẽ thúc đẩy tăng trưởng mảng ứng dụng bằng cách cải thiện hiệu quả đầu tư cho khách hàng và rút ngắn thời gian triển khai.
• Nền tảng dữ liệu AI: Oracle cho biết nền tảng này có thể hoạt động với các nguồn dữ liệu của Oracle lẫn không phải của Oracle. Mô hình kinh doanh có thể bao gồm việc sử dụng nền tảng trực tiếp, đồng thời hỗ trợ nhu cầu về OCI, Cơ sở dữ liệu Oracle và các ứng dụng.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, everyone, and welcome to the Oracle Corporation First Quarter Fiscal Year 2027 Earnings Call. Just a reminder that this call is being recorded. [Operator Instructions]

I would now like to hand the conference over to Mr. Ken Bond, Head of Investor Relations. Please go ahead, sir.

Ken Bond

Thank you, Mariam. Good afternoon, everyone, and welcome to Oracle's First Quarter Fiscal Year 2027 Earnings Conference Call. On the call today are Chief Executive Officer, Mike Sicilia; Chief Executive Officer, Clay Magouyrk; and Chief Financial Officer, Hilary Maxson. A copy of the press release, including financial results, tables and supplemental financial metrics and guidance is now available on our Investor Relations website. Also available on our website is the slide deck that will be used in this call and a GAAP to non-GAAP reconciliation.

As a reminder, today's discussion will include forward-looking statements, and we will make some important comments around factors relating to our business. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today. As a result, we caution you from placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with prepared remarks.

And with that, I'll turn the call over to Hilary.

Hilary Maxson

Thanks, Ken. Hi, everyone. Great to be here with you all today. And like Ken said, you can follow along with our remarks in the earnings slide deck on our website and via the webcast.

If I need to describe this quarter in one word, I think it would be acceleration, as we're seeing an acceleration in execution across the company translating into our top and bottom line results. Q1 was another record quarter, driven by strength in both our Cloud Infrastructure and Cloud Apps businesses. Total revenue was a record $19.3 billion, up 30% year-over-year in U.S. dollars. And for the first time, Q1 total revenue grew sequentially, an important sign of our continued progress in building scaled infrastructure.

Historically, a record Q4 was followed by a lighter Q1. But as we accelerate across the full technology stack from infrastructure to database to software, that's no longer the case. Cloud Infrastructure revenue for Q1 was $7.4 billion, up 121%, reflecting strong execution as we brought record levels of new megawatt capacity online, supported by a continued strong demand environment for compute and our database services. Cloud Apps were up 10%, with Fusion and our industry apps tracking well of that, and Mike and Clay will give more details on those businesses in just a moment.

Our non-GAAP operating income increased 31% in U.S. dollars to $8.2 billion, driven by strong revenue progression boosted by operating leverage. Our gross margin did decline as expected, driven by impacts from ramping up our data centers and the acceleration of infrastructure revenue. However, this was offset in the quarter by lower operating costs and strong operating leverage tied to simplification and efficiency actions.

Net-net, our operating margin remained around flat for the quarter at 42% on a non-GAAP basis. This all translated to a strong increase in our non-GAAP EPS of plus 30% in U.S. dollars, reaching $1.92 for the quarter.

The last point I'll make on the financial highlights is that our remaining performance obligations, or RPO, increased $26 billion from Q4. There are two things happening here. First, we continued to grow our RPO during the quarter to support future revenues. And the vast majority of those new contracts would be a prepay or bring your own hardware or similar mechanic, so [indiscernible] incremental capital from Oracle. Also, that new RPO won't impact our CapEx or revenues until fiscal '28 or beyond.

Second, we started to see a strong conversion of our RPO into revenues this quarter, driving our Cloud Infrastructure results. We've added a few slides here where you can see that strong inflection point in our RPO converting into revenues and operating profits.

First, in Cloud Infrastructure revenues, I already mentioned the plus 121% growth for this quarter, and that's after a Q4 of plus 93%. And we expect acceleration to continue in the remainder of fiscal '27 as we convert more RPO into revenues. We now expect around half of our RPO to convert into sales over the next 36 months.

Next, not surprisingly, you can see the acceleration in our total company revenues here shown on a trailing 12-month basis, driving growth in Q1 to 5 points higher than our Q4 as Cloud Infrastructure accelerates and becomes a larger and larger contributor. Lastly, our growth in operating income, also on a trailing 12-month basis, shows a similar strong acceleration from 16% to 21% between Q4 and Q1.

Now to our balance sheet and cash flows. We drove record cash flow from operations of $23 billion in Q1, again reflecting our strong execution against a backdrop of strong demand as well as collection of customer prepayments. Our CapEx for the quarter was $28 billion, leading to negative free cash flow of $5 billion. And our net cash CapEx, so net of prepayments, was $18 billion for the quarter.

To note, our CapEx will not be linear throughout the year. We continue to anticipate $90 billion to [ $95 billion ] in CapEx for the full year, with not more than $70 billion in net cash CapEx. Lastly, we're quite pleased to announce that we completed our previously disclosed $20 billion at-the-market equity issuance in entirety during the Q1.

With that, let me turn the call over to Mike and then Clay to get into more deals on our Cloud Apps and Infrastructure businesses.

Mike Sicilia

Thanks, Hilary I'll start with some additional color on the applications business. We continue to see the power of application suites in the minds of our customers. They are investing in trusted complete solutions that now seamlessly blend agents and applications together to run their businesses. The introduction of AI is an accelerator, not a replacement for packaged applications. As such, our decade if experience and expertise running business processes across every industry in every geography for organizations of any size gives us the understanding of how to help them succeed.

Before AI came along, application suites had already proven their effectiveness. Companies have been able to increase their profit margins because end-to-end automation with standardized and efficient business processes proved to be much more effective than one-off custom solutions. But that did require organizations to follow workflows and processes as designed in the system, something that many struggle to achieve consistently across functions, teams and regions.

AI changes this dynamic. Rather than asking every employee to navigate and execute a process exactly as the system expects, AI agents can perform tests using the organization's established workflows and business rules. Employees then shift to overseeing agents, resolving exceptions and applying human judgment where it matters most. By combining applied AI with decades of sophisticated [ rules ], regulatory compliance, security models, data models and customer configurations, we enable customers to continuously realize AI's value while keeping their data secure and their operational guardrails intact. This allows organizations to harness the power of our application suites more easily than ever before. We are incredibly confident in the potential for this new paradigm to deliver much more rapid ROI for our customers.

At AI World in October, we will unveil a new agentic AI [ rater ] poised to redefine how customers deploy Oracle applications faster, simpler and at a dramatically lower cost. Working alongside Oracle and customer teams, AI agents will automate and orchestrate implementation at an unprecedented scale, compressing SaaS deployments from years to months and months to weeks. It's really the power of these things together that reinforce my belief that the growth of our applications business is only going up from here.

In Q1, we had a strong quarter in many of our SaaS offerings, driven by the demand environment that I just described. In total, our SaaS business grew 10%, with Fusion growing at 14%. Our Oracle Health business continued to accelerate. And although we don't specifically call it out, our industry applications grew at greater than 20% in Q1.

As I mentioned last quarter, NetSuite saw some slower decision cycles last fiscal year, and therefore, the growth is a little lower than the rest, but we have an exciting new product generally available that I'll speak about just a bit. Now a few customer callouts from a much longer list than the quarter. Uber Technologies, Stanford University and Mitsubishi UFG Bank in Japan all went live and/or accelerated their usage of Fusion. [ Bivarkifier and Safety ] chose Oracle's complete application suite from industry apps to Fusion, including Fusion agentic applications. [ Johnson Controls ], the Saudi National Bank, [ Guidewell Mutual ] Holding Corporation, a health solutions company serving more than 45 million people, and Petronas, Malaysia's national energy company, each added Fusion agentic applications this quarter to drive better outcomes.

So let me share just a few stats around our embedded AI usage and progress in the quarter. Customers used our embedded AI capabilities more than 150 million times during the quarter, with usage growing 42% sequentially. Our AI agents executed more than 3.5 million times in production during the quarter, nearly doubling quarter-over-quarter. Customers have over 2,300 AI agents in production, and that's up 90% quarter-over-quarter. Overall, AI production usage across Fusion alone consumed 900 billion tokens during the quarter. I think it's fair to say that customers are using our AI built into our Fusion applications and our application stack every day.

Now turning to NetSuite. We're announcing the general availability of our new AI-powered offering called NetSuite Next. This presents an agentic experience that is simpler more powerful, and it's infused with AI across the workflows that customers rely on every day. It's easier to adopt. It's more productive from day 1, and it's more valuable as customers grow.

Additionally, the NetSuite AI Connector service, which lets customers securely connect their NetSuite data to leading AI assistants of their choice, including ChatGPT and Claude, is already 1 of the fastest adopted capabilities in the whole -- the entire history of NetSuite with more than 10,000 customers already using it. Personal care company [ Every Man Jack ] estimates that the service alone will save $350,000 annually and nearly 5,000 hours of work.

This month at our Oracle Health and Life Sciences customer event, we will debut our all-new agentic care management system alongside a world-class lineup of external speakers. More than an EHR, this system connects clinical research and care delivery, reduces the burden of records management for patients and enables providers to practice at the top of their license with AI as a user interface.

There are a few AI missions that matter more, helping deliver better care while freeing providers focus on what matters most: their patients, not computer systems. The proof points around Oracle's AI offerings are definitive, and we remain confident in the opportunity ahead.

And with that, I'll turn it over to Clay.

Clay Magouyrk

All right. Thanks, Mike. OCI continues to grow quickly by delivering the capacity our customers need. We delivered 850 megawatts of AI capacity containing more than 300,000 GPUs to customers since the end of Q4. Delivery in Q1 is almost 3x what we delivered in all of Q4 and 73% of the total capacity we delivered last fiscal year. This reflects years of investment in every aspect of infrastructure, from data center design, through supply chain and manufacturing to installation and operations.

Customer demand continues to support this investment. We closed more than $30 billion of additional AI contracts in Q1 without requiring additional capital from Oracle. Our ability to operate a large multi-tenant fleet remains a significant advantage. GPU utilization remains extremely high at 97.9% in Q1. GPU longevity and value continue to impress. Of all the GPUs that came up for renewal in Q1, that capacity was renewed or resold at a 20% premium to prior contracts. The majority of those GPUs are 4 years or older.

We see a long useful life with increasing value for the AI capacity we're deploying. Abilene continues to deliver at an extraordinary pace. We delivered 131,000 GPUs there in Q1, 1.9x the volume delivered in Q4. Six of the 8 campus buildings representing 618 megawatts and 75% of total capacity have now been delivered to the customer. Customer acceptance has compressed to only 24 hours, showing that the systems arrive ready for customer workloads.

The recently released GPT 6 Astra was trained at our site in Abilene. Shackelford is our next gigawatt scale campus and is progressing well. NVIDIA Vera Rubin systems are performing better than expected across hardware quality, manufacturing yield and performance. We will deliver our first Vera Rubin systems to customers in Q2.

Our database cloud business is also growing quickly, Multicloud Database database revenue grew 353% year-over-year, and multicloud customers grew 180% year-over-year. We completed our planned Azure and AWS regional footprint expansion, reaching 70 multi-cloud database regions and 119 availability zones. This gives customers a consistent way to run Oracle AI Database next to their applications and data in the cloud they choose.

We also made Oracle Interconnect for AWS generally available. With this launch, OCI now has private high-speed connections to all hyperscalers with no data transfer charges. That makes it easier for customers to build distributed applications and migrate workloads across clouds.

The pace of AI innovation is increasing across the ecosystem. We expanded our OpenAI relationship to offer OpenAI API access, ChatGPT for Work and [ Codex ] through Oracle Marketplace, including GPT 6 Astra. We are bringing Gemini models to Oracle's enterprise applications, and we released new Grok reasoning, multimodal and text to speech models. We also continue to expand the open source model catalog, including new models from NVIDIA, [ Quinn ], Google, DeepSeek and others.

We announced a multiyear partnership with [ Continuum ] to offer its Helios quantum computer through OCI. Helios will operate in a U.S.-based OCI AI data center, enabling hybrid quantum and AI workloads for enterprise, research and AI customers. Oracle Apex 26.1 brings these infrastructure, database and model capabilities together for application developers. Apex already runs more than 2 million applications, with thousands more added every day.

[ Apex Lang ] is a new technology that represents an Apex application as structured human readable application definitions that can be stored in source control, validated and governed. AI coding agents generate and modify those definitions while the Apex engine continues to provide the security, reliability and operational controls required for enterprise applications. [ Filters ] gain the speed of generative development without the downside of difficult-to-maintain opaque application code.

We are taking the same approach with the Oracle AI Data Platform. AI Data Platform is now integrated with [ Codex ] and Claude Code, allowing developers to work with AI data platform data, knowledge and capabilities from the coding environments they already prefer. We are also adding advanced ML ops capabilities and working with early launch customers on business knowledge models, semantic region engine and deep insight agents. These capabilities ground AI in the meaning of an enterprise with context, [ cement ] and governance. They also bring AI-driven analysis into Fusion data intelligence and Oracle Analytics Cloud, where many customers already manage their most important business data.

Taken together, Q1 shows how the pieces reinforce 1 or other. We are delivering data center and GPU capacity at a pace that would have seemed impossible only a year ago. Customers are signing new contracts, renewing capacity at higher prices and keeping the fleet almost fully utilized. We are placing Oracle AI Database in every major cloud and making more proprietary and open models available on OCI. We are then [ initiate ] models to enterprise data, applications and developer workflows. That combination is why demand continues to grow and while we remain confident in the long-term value of the technology we are building.

And with that, I'll hand it back to Hilary.

Hilary Maxson

Thanks, Clay. I'll finish with our guidance for Q2 2027 and the full year. In Q2, we would expect growth in total revenues of between 30% and 34% in U.S. dollars. Of that, we'd expect growth in cloud revenues in U.S. dollars of between 65% and 71%. In non-GAAP EPS, we expect between $1.85 and $1.93 in, up between 21% and 25% in U.S. dollars. And that excludes the gains from Ampere we booked in Q2 of last year.

For the full year, reflecting the strong execution and acceleration you see in our Q1, we're upping our guidance to at least $90 billion in total revenues. That's a year-over-year increase of plus 34%, and to $8.10 for our non-GAAP EPS. Lastly, a small note from my side to please make sure to mark your calendars for our Investor Day coming up in October.

With that, I'll turn the call back to Ken for the Q&A.

Operator

[Operator Instructions] Your first question comes from the line of Brad Zelnick of Deutsche Bank. Please go ahead.

Phần hỏi đáp

Brad Zelnick

Great. And first off, Ken, knowing that this is your last earnings call, I just wanted to congratulate you on your retirement. For nearly 2 decades, you've been the face of Oracle to the investment community, and you've done so reliably and with such high integrity, and I know you'll very much be missed.

As for my question, I fully expect Oracle will continue to be among a small handful of market leaders for AI infrastructure. And you've told us that fiscal '27 and '28 are peak CapEx years. But at the same time, others in the market are spending hundreds of billions of dollars on capacity. With no end in sight, how should we think about Oracle possibly slowing down spending beyond the next 2 years if others aren't? And is there a scenario where we could see even higher peak beyond fiscal '28? What will guide your investment? And then related to that, given the current state of the backlog as it stands today, when should we expect to see the company return to generating positive free cash flow?

Clay Magouyrk

Thanks, Brad. This is Clay. I like -- I think -- I think there's like 4 questions in there. So I'm going to answer the parts that I want to answer, and then I'll make Hilary do the hard work. So look, I think you've heard us talking about for the past several quarters, we're constantly finding [indiscernible] ways to fund the business. And 1 of the mechanisms that we have to fund our business is obviously that we go out and we spend our own capital.

But we've invested very heavily in relationships with different suppliers and vendors, invented new business models, including bring your own hardware, all of which have different ways of spreading out that capital. And so I think that we have to separate out in our minds what Oracle spends as CapEx directly, uncouple that directly from how we think about how the business can grow. Because from our perspective, I think we see ways that -- we see ways that clearly, capital is still required to do this work. But it doesn't all have to flow from Oracle's side, doesn't have to be Oracle CapEx.

So I don't see it as a limitation to the growth of our business. I think it just represents the continued evolution of the business model that we're developing as kind of this AI expansion continues. Hilary, do you want to talk about some of the other answers?

Hilary Maxson

Yes, sure. So the other question I think you asked was about free cash flow. We haven't given a particular time frame on that yet, and we don't expect to give that today. What I would say, though, is that each of these projects that we're doing by nature is a strong free cash flow generating project. So as soon as they ramp up, very shortly thereafter, they're delivering a free cash flow conversion ratio of something like 100% to post-tax EBITDA. So in fact, the business by nature is somewhat "self-funding" at some point in terms of throwing off a lot of free cash flow.

So we haven't given the time frame on that, but you'll see as we continue to ramp over the next quarters, what that could look like. Again, we expect it to be a reasonably time frame past the big ramp-up that we have going on today. The only decision there, and you pointed it out, would be about more growth CapEx, and that's something that we want to continue to deploy at the right levels to grow the business.

Operator

Your next question comes from the line of Siti Panigrahi with Mizuho. Please go ahead.

Sitikantha Panigrahi

Great. And can I also echo my congratulation, and best wishes on your retirement, you will certainly be missed. And going back to the question, there's been a lot of speculation about potential data center delays in New Mexico and Wisconsin. But you delivered on your Q1 target and now is in raising full year 2027 revenue guide to now at least $90 billion.

So can you give us an update on where both sites actually stand today? And is there any risk to the delivery time line for those data centers that could pose a risk to your '27 revenue expectation? And as you continue to grow RPO, how comfortable do you feel in your ability to secure and bring capacity online to support that growth going forward?

Unknown Executive

Yes. Thanks, Siti. Okay. So I'll answer the specific pieces of that, but I think it's important to have some context before we go forward. New Mexico and Wisconsin are very important large sites for us. But I think it's important to have some context. We talk about these sites kind of as being around 1 gigawatt a piece. We just delivered 850 megawatts in Q1. And what that means is that, and as you can see, neither Shackelford, nor New Mexico or Wisconsin or Michigan were delivering in Q1. So we have a large, diverse broad set of data center developments going on throughout the U.S. and around the world to deliver capacity to customers.

Now some of these sites like New Mexico and Wisconsin, obviously garner a lot of attention. There's a lot of discussion about them. But I think it's important people realize that all of our eggs are not in a single basket. The next thing I would make sure everybody understands is that when these large sites are built, they don't all come online at once. So let's say that you have a gigawatt site. It doesn't -- and it's supposed to start delivering, let's say, in January of a year. It's not like in January, you get a gigawatt of capacity. It's phased over many quarters.

So it's not as though if you have a delay compared to a plan that you have some massive thing that hits in a single [indiscernible]. So -- and then the other thing I would say is that anyone that's been in the business of doing construction or large-scale infrastructure development, if they -- if their plan relies on 100% achievement of every 1 of their deliverables, we have a term for that. It's called a bad plan. And so we try real hard not to make bad plans.

So we obviously know the difficulty and the complexity of what we're doing. And we don't assume 100% of everything is going to work all the time. And we have backup options for those things as well as we don't count that everything is going to get done exactly on time, all the time.

So now moving specifically to the question around Mexico and Wisconsin. New Mexico is an interesting location. We're making very good progress in terms of construction, data center is definitely on track. We're going through the process of acquiring our air permit. And we've got -- the technology that we'll be deploying there is Bloom fuel cells, which is by far the most environmentally friendly way that we can do on-site power generation, has extremely low water consumption, has extremely low emissions compared to really any other way to kind of do on-site generation.

And so we're very confident that as we continue through this process, we'll work with the local regulators and community citizens in Dona Ana County and with everybody else in New Mexico. But we're just going through the process. And I don't think that's rare for large projects like this one.

In Wisconsin, we're not doing on-site generation. We're really working with our partners across the board to design and deliver that energy capability through the grid. But again, working through the process, these are complex projects. And again, in Wisconsin, data center delivery is actually very much on track and going well, working with the Public Service Commission and ATC and [ We Energies ]. We're constantly evolving aspects of the energy design and delivery plan. But we feel very confident in both of those sites.

To the question about impact on FY '27 revenue, neither of these sites will have any impact into our FY -- our previously stated FY 2027 revenue or earnings guidance. So I would say is -- we have some sites that are ahead of schedule, some sites that are more difficult than others. We work through all of them, and we have a plan in place both in terms of risk management, as well as we take that into account when we do our forecasting for how we go about setting expectations for ourselves and then communicating those expectations for you.

And the last question is like how do we feel about bringing more capacity online. I think we feel very excited about it, both in the -- obviously, the environment continually changes. It used to be that the constraints were GPUs and fabs, then constraints moved to power generation. There's data center constraints.

But the world is a big place. There's a lot of demand for this capacity, and we're pursuing all the different avenues to bring the capacity online. So we remain very excited and very confident in our ability to keep meeting both current RPO as well as the future RPO growth that we are expecting to see.

Operator

Your next question comes from the line of Raimo Lenschow of Barclays.

Raimo Lenschow

Thank you. First of all, all the best for Ken, and thank you for the team for making Ken's last quarter like such a great quarter. My question is, again, on the data center side. Obviously, there's a lot of talk about component price increases, et cetera.

Clay, can you talk a little bit about like how your pricing is evolving between contract pricing, spot pricing? And you gave us a framework on gross margins last year. Is that holding? How should we think about that in this ongoing dynamic on component pricing?

Clay Magouyrk

Sure. But definitely, prices -- in a world where demand exceeds supply, we -- typically, prices don't go down, they do go up. And so I think the net effect is that obviously [ costs ] more, but then we have to charge more money for them so that we get compensated. And we're doing that across all of these different businesses.

No, we don't expect this to have an impact on our gross margins. So I think the previous guidance that we've given you there is still remains true. I will say is that, as I mentioned in my prepared remarks, I think there's -- a lot of people have been very concerned about what is the useful life of the different hardware assets? What is the useful -- what is the demand going to be for data centers and the power capabilities that come with it?

I've been in the infrastructure business for pretty much all of my professional career. I've been doing it now for 12 years at Oracle. 1 [ in Variant ] that has been true so far is that the demand for server side computing and data centers has only gone up. And it turns out so far that everything we see about the AI use case is the same way, but only more so, right? The fact that when we go out and we have capacity up for renewal, that we actually can achieve higher prices to the order of 20%, all of those are very positive signs for -- both the continued demand, the growth and then the profitability of this business.

Operator

Your next question comes from the line of Mark Moerdler of Bernstein. Please go ahead.

Mark Moerdler

Ken, we're going to be sorry to see you go, but I'm sure you have an amazing bucket list to add of trips and things to do. So I'd like to focus in on the RPO. Can you give us more details on the drivers of the growth of RPO that is not requiring additional CapEx, the prepaid and bring your own chips? Is this AI labs, semiconductor companies? Or is it that sovereign? In fact, we've not discussed sovereign cloud in a while and we haven't discussed that sovereign AI at all. Can you explain how that side of OCI is going and how that will impact CapEx and margins?

Unknown Executive

Sure. So let me make sure we clarify 1 thing first, and then I'll dive into the pieces. I didn't say -- and I don't think myself nor Hilary said that it doesn't require additional CapEx. We said it doesn't require additional cash from Oracle, right?

So at the -- I'm not an accountant, but I get to play 1 on TV sometimes. But the intention of what we're trying to say is that while there are -- clearly, our capital expenditures does not require Oracle to go out and find additional cash to do it. Now the question becomes, well, how do you do that? Well, we have a variety of different models. Sometimes, it's working with our suppliers through different financing arrangements that allows us to pay for the capacity as the customers pay us. That's 1 mechanism.

Another mechanism is that a customer says, hi, I'd like to pay for the hardware, but use your operational ability and your cloud infrastructure technology assets in your data center to go out and actually turn that into an AI cluster. It's a different option. The third option is that the customer has been able to raise a start-up, maybe it's an established company and says, hi, I would like to pay you upfront as a prepayment. And in return, that doesn't require you to front the cash to go out and spend those -- your dollars and that capital expenditure. So we have different models for achieving that goal.

In terms of the [ customers ] and where we see that demand, it's really broad based, right? It doesn't matter if it's a startup or the most valuable investment companies. There's an understanding of this model right now that the access to capital and different ways of funding that are a constraint and the industry adapts to allocate that in the most efficient way possible.

Now specific to your sovereign cloud question, look, our alloy business is doing well. We've got a lot of partners in Japan. We've got great partners in the Middle East. We've got partners that are both going after the commercial business in a more sovereign way, as well as kind of more government-focused sovereign cloud. That continues to expand broadly. We're seeing lots of demand.

And also, it's actually tied to AI as well because many of those customers, we offer GPU capabilities for those customers, and they deploy that for those on sovereign workloads. Obviously, we also have a very large and very rapidly growing general-purpose cloud business that we don't talk about quite as much, but that is growing rapidly and has great growth rates, great margins and does require some capital, but not as much as the giant AI clusters.

Operator

Your next question comes from the line of John DiFucci of Guggenheim Securities. Please go ahead.

John DiFucci

I'm going to make a quick comment here, too. I've covered Oracle for almost 3 decades. I think Ken, you've been there for close to 2. In this business, it's always nice to develop professional friendships, but it's even nicer when they become personal friends, which is what I count you as. And importantly, I've learned a lot from you. So I just want to say thank you.

But as far as what Raimo said, I'm glad, team, you had a good quarter, but not so much for Ken, for me because you're my best idea, and that's -- it's all about me. So I think my question here is for Hilary. Hilary, gross margins came down meaningfully this quarter. But you had so much capacity coming online this quarter. I assume that before that, there were a lot of expenses associated with those deals coming online, but they didn't have much revenue yet. Nevertheless, it was a big drop in gross margin. It is something that we all on this call talk a lot about when we're talking to investors.

But as you pointed out, operating margin is flattish, up a little bit year-over-year. I know operating margin is the North Star because that's closest to the bottom line profit in eventual cash flow. But how should we think about gross margins going forward in addition to operating margins, that whole ecosystem?

Hilary Maxson

Sure. So for me, gross margin, obviously an important thing to follow both internally and externally because particularly -- actually in both of the business models or all 3 of the business models that we have. It's really a health indicator of the business. Are you -- can you price? Are you pricing at the right level? Are you able to manage your input costs? So gross margin, to me, is always an important indicator, probably even more important internally for us to double check. And I think investors obviously want to double check. It's something that will change very quickly, for example, if we don't have the right pricing model.

When we talk about driving value, though, and driving value for the business, for me, operating margin is probably the ultimate point that we want to follow. So gross margin, like you mentioned at the moment, there's a number of things going on. We have both the ramp-up in data centers, plus we have an adjustment across the 2 business models that we have in the business, software being a much higher gross margin business, but with higher R&D and sales costs below gross margin, infrastructure being a lower gross margin business, and we've talked about that, and we gave the numbers. Clay has given the expectations for quite a bit of that business, not database, obviously, but the more AI infrastructure and cloud side.

But that business, by nature, has much lower R&D in sales associated with it, at least a company like Oracle, where we can effectively gain from all of the R&D that's already been done and being done across rest of the company. So really how to watch how we're going to drive value out of the business over time, I think operating margin is really the key metric that we would look at. Again, not forgetting about gross margin, something to look at, but operating margin being very, very important tied to value.

John DiFucci

That's for your -- and that's where we'll focus on. But how should we just so -- because most people -- I think the Street typically overestimates which your gross margins are going to be the underestimated what the impact is going to be to operating margins. So it should -- I don't know if you're prepared to say, like should gross margins continue to go down now from here? Or should they be steady around these levels for the rest of this year? And how should we think of that?

Hilary Maxson

Yes. So we've mentioned already, I mentioned in the Q4 that we would expect a step down in gross margins this year. You can see the EPS [ give ] those. So you can see what we might expect in terms of operating margin. Over the next couple of years, as we finish the ramp-up, you can reasonably expect that gross margin would flatten, I would say. But we haven't given any particular guidance today. We'll speak more about some of the stuff on the upcoming Investor Day, though, in October.

Operator

Your next question comes from the line of Brent Thill with Jefferies. Please go ahead.

Brent Thill

Mike, I'm seeing double-digit growth in SaaS. Maybe if you can walk through what you're seeing over the next couple of years? I think there's been the fear of the SaaS business across the industry taking ahead because of AI, but it seems like that's not your view. Give us your perspective on what you're seeing in terms of keeping sustainable double-digit growth.

Mike Sicilia

Yes, sure. Thanks for the question. Here's how I think about our SaaS business, and I'm going to take the liberty of broadening it a little bit because I think there are a couple of key adjacent things that are very important in SaaS.

First is we have a highly differentiated offering in that we have end-to-end suites that automate complete industries: healthcare, retail, telecommunications, construction. There's a whole list of these industries where we have horizontal applications, vertical applications. And if you look at our 2 very big categories in the quarter, both Fusion and industries, our industry locations is growing very nicely.

The fact that customers can get them as a complete suite and a complete package has been a differentiator for Oracle for years now. And now you layer in AI embedded into those workflows, adding AI as a service as part of the regular application updates that our customers are getting. And we think, Brent, it's a really nice way for customers to get value from AI or ROI from embedded AI very, very quickly without having to bolt anything as a sidecar.

Now the next layer is our agentic, our Fusion Agentic AI studio, which allows customers and/or partners to build their own AI agents right inside the same platform. That's not a different platform. It's not a different control plane. It is the same control plane and the same platform that our applications are running on, which means that Agentic Studio allows customers to build their own agents or partners, gets all of the same quarterly updates, gets all of the same security passing and is available as a complete service to our customers. And you're allowing customers to position AI as a UI on top of a very complex set of business rules, on top of a highly differentiated security model and, of course, data models that have evolved for years and years.

So you put the onsite horizontal applications, the vertical applications, the agentic studio together, and we think that's very compelling. But if that's not enough, the next piece that we're -- as I mentioned, that we're unveiling is AI assistant go lives. These are -- in many cases, we're taking on very hard work in helping our customers solve very mission-critical industry-specific problems.

And sometimes those go-lives can take a long time. They're complex. There's data migrations. Well, AI has given us a tremendous ability to accelerate those go-lives. And we have some proof points for the tooling that we've rolled out to date, and we'll roll out a bunch more of it at AI World. But we've seen like, for example, complicated go-lives in our healthcare applications that were in the high double-digit months coming down to single months for go lives.

In our NetSuite applications, we've seen early customers leveraging these AI tools coming down from double-digit months down to single-digit weeks in order to be able to go live in production. So we think that does 2 things. Number one, it helps us -- it helps customers, rather, get to value from AI more quickly than ever and certainly at a lower cost. So number two, in some of these very complex industries, there's ramps associated with these go-lives and it allows us to unlock the ramp and recognize revenue more quickly. Then we may -- we have in the sort of manual implementation piece.

But I think the other piece that's quite important is, as we mentioned in the press release is, again, part of the same platform running our applications on the AI data platform, which automates the creation of enterprise ontology. So while we are very honored to serve our customers with a very widespread and very large suite of applications, there are other applications as well. And being able to take those applications that our customers are running create an enterprise ontology as an automated service and then layer those AI agentic studios on top of that. When you put all that together, right, I just don't thing that anybody else in the market is delivering all of that as a cloud service, certainly not in highly regulated industries, certainly not at the scale that we are.

And then 1 other thing I'll mention, our SaaS business is that our SaaS business is also a wonderful lead generation business for our IaaS business. Our SaaS customers are also buying OCI. They're also have other workloads, non-Oracle workloads that they're more than happy to leverage OCI. They get a very good test of the performance and scalability of OCI as a SaaS customer because they are inherently an OCI consumer at that point as well.

So we think about it as really the SaaS business being part of our overall solution set that we're delivering to customers. We continue to invest in that solutions that we continue to make it easier to go live and add more and more tooling to allow customers to configure and leverage AI. So for all those reasons, we're quite optimistic on the future of our applications business.

Operator

Your final question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Please go ahead.

S. Kirk Materne

Ken still has an Analyst Day to get through. So I'll wait and say congrats to him in person in a month or so. But Mike, you mentioned the AI data platform, you guys put it in your press release. So I just wanted to double click on that. It seems like an important way in allowing customers to plan against the proprietary data. Can you just help us understand the business model around that? Does it drive incremental consumption of Oracle Database, OCI? Or do you see that being sort of a stand-alone software revenue opportunity? I was just curious kind of how we should think about that playing into the financials over time.

Mike Sicilia

I think you sort of clicked on the answer really to the business model is all the above. I mean certainly, we can run this in a model where we're consuming 100% of non-Oracle work. This is by no means specific to the Oracle Database on the Oracle applications. The AI data platform is agnostic and able to pull in the ontologies from any data source. In fact, we have hundreds of data sources that we're doing automation for today.

So whether it's just pure consumption of AI data platform, whether it's used in concert with our applications or whether it's used in concert with OCI, we're more focused on allowing the customer to make the best choice or the partner to make the best choice to use them. So I think it really helps all of our business.

I would say also that the Oracle Database still remains the most -- probably the most coveted custodian of mission-critical data in the world. And certainly, as we're able to automate ontologies and have the Oracle [ Space ] as 1 of the primary fees, at least for the mission-critical data that, it also helps us unlock our ever-growing Multicloud Database as well, where certainly, customers would like to take those on-premises versus the Oracle Database and very easily move them into the cloud. As we continue to invest in making that available in every cloud, in every region, we think the AI data platform will help drive that growth as well.

S. Kirk Materne

I know you guys had a huge services system, but will you guys be putting forward deployed engineers around that to try to help customers understand some of the opportunities things they can expose? Perhaps they haven't been able to expose before? The database just kind of is there a go-to-market to it, too?

Unknown Executive

Yes, absolutely. And we are already investing and deploying forward deployed engineers at our customers. That's true for the Data platform. It's also true for our Fusion agentic studio as we see them really as a combination platform running on a single control plane in OCI. So yes, no doubt that service offering, we think is necessary. I actually think we help get the customers live as quickly as we possibly can. And as I said, we're measuring some of the successes now weeks, which in heavily regulated industries, you really would not have dreamed of maybe even a year ago.

Ken Bond

Thank you, Mike. For next quarter, we expect our Q2 fiscal year '27 earnings results will be announced on December 14 of '27 -- '26, excuse me. Any change to the date will be publicly announced. A telephonic replay of this conference call will be available for 24 hours on our Investor Relations website.

Thank you for joining us today. And with that, I'll turn the call back to Mariam for closing.

Operator

Thank you. This concludes today's conference. We would like to thank you all for your participation today. You may now disconnect.