Oracle Stock Rises on Confirmation of Meta Cloud Deal

Oracle shares surged 3% on Thursday following confident projections and the confirmation of a significant cloud-computing deal with Meta.

The database giant is forecasting a substantial jump in revenue from its AI-powered database and AI data platform offerings, anticipating $20 billion in fiscal year 2030. This is a significant leap from the $2.4 billion projected for fiscal 2025 and $3 billion for 2026, signaling aggressive growth in the AI infrastructure market.

“The change in these numbers reflects an improved supply situation, not immediately, but in the coming years,” Clay Magouyrk, Oracle’s co-CEO, stated at the company’s AI World conference in Las Vegas. “As we secure that supply, driven by immense customer demand, we are focused on delivering these cutting-edge solutions.”

Magouyrk further elaborated, noting that Oracle secured $65 billion in new cloud infrastructure commitments within a mere 30 days this quarter.

“This impressive figure spans seven different contracts from four unique clients,” Magouyrk emphasized. “While OpenAI is a valued customer, it’s important to recognize that our AI infrastructure demand is broad-based and extends far beyond a single entity.”

Meta is among the four key customers contributing to this surge, confirming earlier reports of a potential $20 billion cloud deal between the two tech powerhouses. This agreement underscores the escalating investments by prominent tech companies in AI infrastructure.

Meta’s increased capital expenditure plans, anticipating investments between $66 billion and $72 billion this year, highlight the scale of resource allocation towards developing and deploying AI technologies. This surge in demand is putting pressure on the supply chain for high-performance computing and specialized hardware, potentially impacting the rollout timelines for some AI projects.

Oracle’s expansion of its cloud infrastructure division positions it as a direct competitor to established players like Amazon and Google in the rapidly evolving cloud landscape. Furthermore, Oracle is strategically offering its flagship database solutions on rival cloud platforms, demonstrating a commitment to flexibility and customer choice. This multi-cloud approach allows businesses to leverage best-of-breed services across different providers, mitigating vendor lock-in and optimizing performance.

Building upon its growing portfolio, Oracle secured a commitment from OpenAI valued at over $300 billion in July, further solidifying its position in the AI infrastructure market.

Profitability in the AI infrastructure sector remains a critical focus. Oracle estimates adjusted gross margins between 30% and 40% for its AI infrastructure, factoring in land, data center construction, power consumption, and advanced computing equipment costs. This margin profile aligns with industry benchmarks, but factors like competition and technological advancements will impact profitability in the coming years. The ability to efficiently manage infrastructure costs and deliver specialized AI services will be instrumental in achieving and maintaining long-term success in this competitive market

Doug Kehring, Oracle’s principal financial officer sought to dispel any notions about revenue chasing, asserting that Oracle exclusively pursues opportunities underpinned by attractive market margins.

Oracle is now projecting adjusted earnings per share of $21 on $225 billion in revenue for fiscal 2030, signifying a 31% compound annual growth rate. This optimistic outlook surpasses analyst expectations of $18.92 per share on $198.39 billion in revenue. While the stock experienced a slight dip of 2% in extended trading, the overall positive sentiment surrounding Oracle’s AI strategy remains strong.