Oracle shares climbed as much as 10 per cent on Tuesday after the outfit beat expectations and raised guidance, while trying to calm nerves about its AI infrastructure punt.
Oracle founder Larry Ellison’s database shop posted $17.2bn in fiscal third-quarter revenues, up 22 per cent on the year, and forecast $90bn in sales for its next fiscal year.
Oracle credited strong demand for cloud computing for AI training and inferencing with helping it comfortably meet and likely exceed revenue growth rate forecast for 2027 and beyond”.
The Austin-based outfit has been under pressure as it tries to take on bigger cloud beasts such as Amazon and Microsoft in supplying compute to AI companies.
That pivot has meant more borrowing to fund expensive data centre builds, with Oracle leaning hard on OpenAI after the pair signed a huge deal last year.
The stock is down more than 50 per cent from its autumn peak, but it still managed a bounce in after-hours trading once the numbers landed.
Oracle, co-chief executive Clay Magouyrk told investors: “This has been made possible by Oracle’s transition from a traditionally seasonal, licence-based business into a highly predictable, recurring revenue cloud.”
Cloud revenue came in ahead of expectations at about $8.9bn in the quarter.
Oracle pushed back against grumbling about its AI strategy because its $300bn deal with OpenAI leaves a lot riding on a loss-making start-up sticking to its commitments.
Oracle said some of the biggest AI data centre customers had “recently strengthened their financial positions quite substantially”, without naming OpenAI, which recently closed a record $110bn funding deal.
Magouyrk said 90 per cent of the data centre capacity it needs to deliver in the next three years is now fully funded, which is meant to stop the debt panic.
Oracle said it has no plans to raise additional debt this fiscal year after selling $25bn in bonds in February, even as it lines up billions more in equity.
It said customers had paid upfront or were buying pricey GPUs to pack out Oracle’s halls themselves, which is one way to shift the pain down the line.
Oracle’s long-term debt, including operating leases, rose to $143bn while capital expenditure in the quarter jumped by more than 50 per cent to $18.6bn, higher than Visible Alpha estimates.
Oracle is stuck with a $50bn capex forecast for the current fiscal year, after the stock dropped 10 per cent when it unveiled the higher guidance three months ago.
Remaining performance obligations rose to $553bn in the three months to the end of February, while net income came in broadly as expected at $3.7bn.
Oracle said it has been “restructuring” its software engineering teams because AI coding tools would allow them to “build more software in less time with fewer people”.
Analysts reckon job cuts and business unit sales are on the cards to keep the AI build-out rolling, and Oracle has drawn down about $961mn from a $1.6bn pot set aside for staff whose roles get chopped.
Oracle has insisted that its sprawling projects are on track despite concerns about financing and regulatory hurdles, even after the FT reported that a key financial partner would not back a Michigan site.
Michigan’s attorney general has pushed regulators to revisit that site’s power plans, which is not the sort of delay you fix with a slide deck.
Oracle shares took a hit after reports last week that OpenAI would not take up an option to expand at a data centre campus in Abilene, Texas.
Oracle keeps saying the projects are on schedule, and it raised $25bn through a blockbuster bond offering last month to keep pouring concrete.
