Oracle spent $28.5 billion in one quarter to feed its AI cloud

Oracle also says it delivered 850 megawatts of new data-center capacity and more than 300,000 graphics processors during the quarter. Reuters reports that its shares rose four percent after hours after revenue and adjusted earnings beat estimates. The results support Oracle's claim that customers want the capacity it is building.

Oracle's $28.5 billion in quarterly capital spending exceeded its total revenue. Free cash flow was negative $5.4 billion, according to Reuters. The company says customer prepayments covered about $11.36 billion of the spending, and that many new orders use prepayment or customer-owned hardware.

Backlog is a promise of future revenue, not cash in the bank. Oracle expects about half of it to convert into sales within 36 months. Power, construction, permitting and customer demand still have to arrive on schedule. S&P Global cut Oracle's credit rating in July because of weak cash flow and higher business risk.

Quarterly filings should show whether Oracle can turn its backlog into cloud revenue fast enough to restore positive free cash flow. Oracle should disclose customer prepayments separately because they shift part of the financing burden but leave the delivery risk in place.

Watch capital spending, debt and how much completed capacity customers use. A rising backlog paired with delayed data centers would widen the funding gap. Higher use and lower cash burn would show that the new capacity is starting to pay for itself.