Oracle Corporation recently announced a significant increase in orders for its cloud infrastructure department's future artificial intelligence business, which pushed the company's stock up 27% in after-hours trading, hitting a new all-time high. The company reported that unfulfilled performance commitments—revenue that has been signed but not yet realized—soared to $455 billion, far exceeding $138 billion three months ago.
Image source note: The image is AI-generated, and the image licensing service provider is Midjourney
Oracle's CEO Safra Catz described it as an "extraordinary quarter" and said the company signed four multi-billion-dollar contracts with three different customers in the latest three months. Wall Street had expected the growth in orders, especially after Oracle signed a $30 billion annual contract in July this year, but did not anticipate such a significant increase in orders.
Although Oracle started late in the cloud computing services sector, it has gradually gained market recognition as demand for data center infrastructure from artificial intelligence startups and other major tech groups has surged. Earlier this year, Oracle also signed a $50 billion "Star Gate" partnership agreement with OpenAI and SoftBank.
The rise in the company's stock in after-hours trading added about $170 billion to its market value, and also increased the personal wealth of founder Larry Ellison by approximately $70 billion, securing his position as the second-richest person in the world, behind Elon Musk. Since the beginning of the year, Oracle's stock has risen by 43%.
In a call with investors, Catz stated that Oracle has signed important cloud contracts with many leading companies in the artificial intelligence field, including OpenAI, xAI, Meta, Nvidia, and AMD. She predicted that the company's infrastructure business revenue will surge from $18 billion this year to $144 billion over the next five years, which is expected to be nearly 60% higher than what Wall Street anticipated.
By comparison, Amazon Web Services' revenue in the previous fiscal year exceeded $107 billion. This growth has raised questions among Wall Street analysts, who are concerned about how Oracle can quickly increase computing capacity to meet new demands, while most cloud companies currently face chip shortages.
Oracle expects its capital expenditures to increase by $10 billion, reaching $35 billion, in its fiscal year ending in May next year. Catz claimed that Oracle can achieve higher revenues with relatively low capital expenditures because it does not invest in buildings and uses computing equipment more efficiently. Ellison added that future demand reflects a shortage of computing power needed for reasoning after training AI models.
Oracle's latest quarterly report showed a 12% increase in revenue, reaching $14.9 billion, slightly below the $15 billion expected by Wall Street. Adjusted net income increased by 8% year-over-year to $4.3 billion, exceeding analyst expectations.
Key Points:
💼 Oracle's future AI business orders have surged, with unfulfilled performance commitments reaching $455 billion.
📈 The stock rose 27% in after-hours trading, increasing the market value by about $170 billion.
🤝 The company has signed important contracts with several AI giants, and it is expected that infrastructure business revenue will grow significantly in the future.
