Oracle shares rose sharply in late trading Tuesday after the software firm reported a mixed earnings report but revealed a significant increase in its backlog of contracted work.

Adjusted earnings-per-share for Oracle's fiscal first quarter rose to $1.47 versus Wall Street's consensus estimate of $1.48, according to FactSet, and up from $1.39 last year. Revenue for the quarter reached $14.9 billion, behind expectations for $15.0 billion, and up 12% over last year.

Oracle also missed expectations for cloud services revenue growth, a key metric. Guidance for the second quarter was also thin.

But the headline for many was Oracle's contracted backlog rising to $455 billion, up from just $138 billion in the fourth quarter. The figure is indicative of the intense demand for renting AI servers in the cloud, a business that the firm, chaired by Larry Ellison, has only recently entered after years in the database market.

Oracle stock was up 27% in after-hours trading.

Oracle's headline sales growth masks a huge shift happening under the surface as Oracle follows the Microsoft playbook. Once just a vendor of packaged software, Oracle is shifting customers to cloud-based versions with annual subscriptions, while at the same time launching a public cloud to compete with Amazon.com's Amazon Web Services and Microsoft's Azure.

Oracle's cloud growth has been made possible by the artificial-intelligence boom, and the rapidly expanding demand for renting AI servers in the cloud. First-quarter revenue from Oracle's public cloud services were up 55% over the previous year.

"We signed four multi-billion-dollar contracts with three different customers in Q1," Oracle CEO Safra Catz said in the earnings release. "Over the next few months, we expect to sign-up several additional multi-billion-dollar customers and RPO [backlog] is likely to exceed half-a-trillion dollars."

"We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD and many others," she revealed in the earnings call.

Ellison spoke to the intense pace of demand. "Someone called us: "We'll take all the capacity you have that's currently not being used anywhere in the world. We don't care," he said during the earnings call. "And I've never gotten a call like that."

Once an asset-light company, Oracle has been aggressively building data centers to fulfill customer demand. In fiscal 2026 Oracle expects $35 billion in capital expenditures, up from $1.6 billion in 2020 before this shift began. The rocketing backlog will require even more capex to support it.

Oracle looks like two different companies--the legacy business and the cloud segment. Cloud services represented nearly half of revenue in the first quarter, up from 25% in the first quarter of 2022.

Before Oracle's cloud services started taking off, from 2012 through 2022, Oracle sales grew at an average rate of only 1.6%. But the company was also a cash-flow machine, allowing management to reduce the company's diluted share count by an annual average of 5.3% through share buybacks, boosting per-share metrics by 84% over that period.

Because of the new capex, share repurchases have nearly come to a halt, and the share count is rising again. Free cash flow, operating cash flow minus capex, was negative two quarters in a row now. This is the tradeoff for the rapid growth in cloud, which is starting to take over the company's income statement.