Oracle posts strong cloud sales growth following AI bookings

[NEW YORK] Oracle posted quarterly cloud revenue that was better than expected and projected strong sales in the upcoming fiscal year, a sign the company is making good on its massive artificial intelligence (AI) bookings.

Revenue in Oracle’s closely watched infrastructure business gained 84 per cent to US$4.9 billion in the period ended Feb 28, the company said on Tuesday (Mar 10). That marked a faster increase than the 79 per cent anticipated by analysts and a 68 per cent sales rise in the previous quarter.

Oracle is working to deliver on massive cloud infrastructure contracts with customers such as OpenAI and Meta Platforms. Known for its namesake database software, the company’s cloud business has found major success by providing chip-filled data centres and other equipment for training and deploying AI models.

Remaining performance obligation, a measure of bookings, were US$553 billion, compared with the US$523 billion reported in the prior quarter. Most of this increase came from large-scale AI contracts in which the customers will fund the up-front purchases of semiconductors, the company said in the statement.

Oracle said total revenue would reach US$90 billion in the fiscal year beginning in June. Analysts, on average, estimated US$86.7 billion.

“The demand for cloud computing for AI training and inferencing continues to grow faster than supply,” the company said. “Furthermore, some of the largest consumers of AI Cloud capacity have recently strengthened their financial positions quite substantially. These market dynamics enable Oracle to comfortably meet and likely exceed our revenue growth rate forecast for FY27 and beyond.”

The shares increased about 7 per cent in extended trading after closing at US$149.40 in New York. The stock had lost more than 50 per cent of its value from a September peak to Tuesday’s close as Wall Street grew worried about the costs and logistics associated with the massive build-out.

Capital expenditures, a metric of data centre spending, were about US$18.6 billion in the quarter, higher than the US$14 billion anticipated by analysts.

Oracle said that due to advancements in AI-assisted coding, the company has been restructuring product development teams to make them smaller. “This new AI Code Generation technology is enabling us to build more software in less time with fewer people,” the company said.

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Last week, Bloomberg reported that Oracle was planning thousands of job cuts across the company to help trim costs. It has disclosed US$1.6 billion in expected restructuring costs in the fiscal year through May, its largest such plan on record.

In the fiscal third quarter, total revenue increased 22 per cent to US$17.2 billion. Earnings, excluding some items, were US$1.79 per share. Analysts, on average, estimated profit of US$1.70 a share on sales of US$16.9 billion, according to data compiled by Bloomberg.

Oracle’s cloud applications business expanded 13 per cent to US$4 billion, in line with estimates. BLOOMBERG