Oracle reports boost in data centre revenue as AI strategy accelerates
Oracle stock jumped on Thursday after it reported a boost in revenue from its data centre business as it starts to deliver the capacity needed to fulfil bumper AI contracts.
The company founded by Larry Ellison posted revenues of $7.4bn in its data centre business last quarter and said growth in its wider cloud unit would accelerate to 64 to 70 per cent year on year, exceeding analysts’ estimates.
The positive forecast suggests Oracle’s risky and expensive bid to transform itself from a business software company into an infrastructure provider to AI labs such as OpenAI is beginning to bear fruit. Shares in the company climbed 7 per cent in after-market trading.
Total revenue rose 30 per cent to $19.3bn for the three months to the end of August, compared to the year before, thanks to “continued broad-based demand in Cloud Infrastructure and Cloud Applications”, Oracle said.
Oracle has stretched its financial capacity in an effort to compete with much larger cloud computing rivals, such as Amazon and Google, in the hugely expensive race to build AI infrastructure and serve leading players like OpenAI, with whom it has a $300bn contract.
Capital expenditures came in much higher than expectations at $28.5bn, up from $8.5bn a year before. Net income was $4.7bn.
The Austin, Texas-based group previously told investors it would invest $70bn in the coming fiscal year to finance its data centre construction, up from $55.7bn in the year ended May 31.
It said it had completed a previously announced $20bn share sale as part of a $50bn package of measures to help finance data centres, including a large bond sale.
S&P downgraded Oracle’s credit in July to one notch above junk status, citing its reliance on a few customers and uncertain path to profitability in its AI data centre business.
The company on Thursday said free cash flow for the first quarter was negative $5bn, as it continued to burn through cash to finance data centres.
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