Oracle headquarters in Redwood Shores, Calif., in 2023. Long known for database software and enterprise applications for finance, Oracle has repositioned itself as a cloud computing infrastructure competitor.Justin Sullivan/Getty Images
Oracle ORCL-N on Tuesday predicted that the AI data centre boom will power its revenue above Wall Street estimates well into 2027, sending its shares up 8 per cent in extended trading.
The results help to allay investor concerns that Oracle’s costly multi-billion dollar push into AI computing would not generate profits quickly enough.
Remaining performance obligations (RPO), a key indicator of future contracted revenue, grew 325 per cent from last year to US$553-billion, ahead of the US$540.37-billion estimate from four Visible Alpha analysts.
Most of the increase in RPO in the quarter is related to large-scale AI contracts where Oracle “does not expect to have to raise any incremental funds,” the company said in a statement.
The company also raised its revenue forecast for fiscal 2027 to US$90-billion, above analyst estimates of US$86.6-billion, according to LSEG-compiled data.
“Oracle’s quarter is a beat and a stress test result for the AI trade,” said eMarketer analyst Jacob Bourne. “As the most debt-exposed major player in AI infrastructure, Oracle is the canary in the coal mine and this report suggests there’s underlying health in AI spending beyond the hype.”
Long known for its database software and enterprise applications for finance, Oracle in recent years has repositioned itself as a cloud computing infrastructure competitor after recruiting key executives from rivals.
The company’s strategy to build out data centres is helping it capture a slice of the booming AI market. Oracle has been aggressively spending to expand its cloud infrastructure to support generative AI workloads, competing for customers against hyperscalers such as Amazon’s AWS and Microsoft’s Azure.
Oracle also said that it has been restructuring its product development teams, as new AI code generation technology enables it to build more software in less time with fewer people.
The company reported total revenue of US$17.19-billion for the quarter, compared with analysts’ average estimate of US$16.91-billion, according to data compiled by LSEG.
For its current fiscal fourth quarter, Oracle predicts adjusted profits between US$1.96 and US$2.00, above analysts’ estimates of US$1.94 per share.
The company expects fiscal fourth-quarter revenue growth of 19 per cent to 21 per cent in U.S. dollars, in line with analysts’ estimates of 20.2-per-cent growth to US$19.12-billion. Similarly, Oracle forecast cloud revenue growth of 46-per-cent to 50-per-cent in U.S. dollars, also in line with estimates of 48-per-cent growth to US$9.98-billion, according to LSEG data.