Oracle’s customers prepaid a sum equal to two fifths of what it spent building in the quarter

Oracle’s customers prepaid it $11.4bn in the three months to 31 August, against $28.5bn it spent on capital projects. Its buyers are financing its build. The cash-flow line reads “increase in deferred revenues from customer prepayments with significant financing component,” and that accounting label means the money arrives far enough ahead of the service that it works as a loan from the customer to the builder of the capacity.

Cloud infrastructure revenue reached $7.4bn, up 121 per cent from $3.3bn a year earlier. Oracle says it booked “more than $30 billion of additional AI cloud contracts” in the quarter, lifting remaining performance obligations to $664bn from $638bn three months earlier.

That backlog grew 46 per cent on the year, against 359 per cent a year ago, which reads like a slowdown and is mostly arithmetic on a base that had already more than quadrupled. It still rose by $209bn, from $455bn a year earlier. The verdict for a buyer is that a prepayment is a loan to Oracle against capacity not yet built, and it should be priced as one.