From the Wall Street Journal, December 10:
The company’s growing data-center outlays will take longer than investors would like to pay off
Oracle is facing mounting anxiety from investors about how much it’s spending to build out data centers for the artificial-intelligence industry.
The cloud-computing company’s revenue and operating income for the most recent financial quarter fell slightly short of analysts’ expectations, while the company raised its spending forecast, adding fuel to concerns over the timeline for turning the AI industry’s ravenous demand for computing capacity into profits.
Oracle’s revenue and operating income for the most recent financial quarter fell slightly short of analysts’ expectations, adding fuel to concerns over the company’s ability to capitalize on the AI industry’s ravenous demand for computing capacity.
The company reported quarterly revenue of $16.1 billion, up 14% from a year earlier, with overall cloud revenue growing by 34%. Its adjusted operating income of $6.7 billion represented a 10% increase. Cloud infrastructure revenue, reflecting Oracle’s business from AI companies, was $4.1 billion, slightly lower than analyst expectations.
Shares fell more than 11% in after-hours trading. Oracle’s stock has fallen more than 30% since early September.
The company said Wednesday it had new cloud-computing commitments from Meta Platforms, Nvidia and other companies. Oracle said its backlog of deals increased to $523 billion during its fiscal second quarter, up about $68 billion from the preceding quarter.
The announcement in September that its backlog of contracts had surged to $455 billion sent its shares soaring, briefly making co-founder Larry Ellison the world’s richest person. But shares have since tumbled on concerns about the level of risk Oracle is taking in its build-out.
“Ultimately, it comes down to ‘how is Oracle going to raise the money?’” said Rishi Jaluria, an analyst at RBC Capital Markets. “It’s one thing to build a backlog, but having that backlog translate to revenue shows ability to actually meet those demands.”
Oracle made capital expenditures of about $12 billion during the quarter, nearly $3.7 billion more than what analysts had predicted. On a conference call, Doug Kehring, Oracle’s principal financial officer, said the company’s capital expenditures forecast for its current fiscal year will be $15 billion higher than what it previously projected. Kehring said the company expected $4 billion of additional revenue from bookings, but not until fiscal 2027.
OpenAI agreed to purchase $300 billion in computing power from Oracle over roughly five years as part of a data center project called Stargate. In October, Oracle executives said they had signed an additional $65 billion worth of infrastructure contracts from four different customers that didn’t include OpenAI....
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