Oracle's stock surges by 3% after Meta cloud deal confirmation and bullish AI revenue forecast

Oracle stock surged 3% on Thursday, after the company confirmed a major cloud-computing partnership with Meta and issued a powerful new forecast for its artificial intelligence (AI) revenue growth.

The announcement came during Oracle’s AI World conference in Las Vegas, where the company outlined how its AI-driven database business will expand sharply in the coming years.

The database giant now expects its AI-powered data platform revenue to surge to $20 billion by fiscal 2030, up from $2.4 billion in fiscal 2025 and $3 billion in 2026.

This rally, Oracle executives said, will be driven by surging demand for computing capacity and easier access to hardware supplies over the next few years.

Speaking to analysts, Clay Magouyrk, one of Oracle’s two new CEOs, explained, “You see the change in these numbers that it’s a little bit easier for us to find supply, not this year or next year, but in subsequent years. So as we’re able to find that supply, customers contract for it, we see immense demand, and then we go about delivering that to customers.”

Oracle confirms Meta deal and $65 billion in new contracts

During the same presentation, Clay revealed that in just 30 days of the current quarter, Oracle secured $65 billion in new cloud infrastructure commitments, spread across seven different contracts with four major customers.

Clay stressed that none of those clients were OpenAI, addressing speculation that Oracle’s recent growth was overly dependent on the ChatGPT maker. “None of those customers are OpenAI,” he said. “I know some people are questioning sometimes, ‘Hey, is it just OpenAI?’ The reality is, we think OpenAI is a great customer, but we have many customers.”

Among those customers is Meta, which operates Facebook and Instagram. Reports from Bloomberg in September said the two companies had been negotiating a $20 billion cloud deal, which Clay confirmed is now in motion. This comes as Meta continues one of the tech industry’s largest AI spending sprees, with its capital expenditures for 2024 expected between $66 billion and $72 billion.

The partnership gives Oracle a massive boost as it competes directly with Amazon Web Services and Google Cloud for a slice of the AI infrastructure market.

The company has been expanding its cloud infrastructure division, while also allowing its database software to run on other clouds, which has helped attract diverse clients. Back in July, Oracle even secured a $300 billion commitment from OpenAI, showing just how aggressively the company is scaling its footprint in high-end AI compute.

Oracle sets bold targets for 2030 with focus on profit margins

Despite its explosive growth, Oracle disclosed that AI infrastructure carries a gross margin of 30% to 40% after accounting for land, data center, power, and computing costs. Yet, according to a report from The Information, Oracle earned only 14% on renting out Nvidia AI chips in the August quarter, evidence that costs are still tight as AI hardware demand outpaces supply.

Chief financial officer Doug Kehring pushed back against the idea that Oracle is chasing revenue at any cost. “I’ve read a lot of stories that are speculating that Oracle is chasing revenue for revenue’s sake,” Doug said, adding that:- “But let’s be crystal clear: we only pursue opportunities where we have a clear line of sight to attractive market margins that reward us for intellectual property and the activity we bring to customers.”

After the market closed, Oracle announced new long-term targets; $21 in adjusted earnings per share on $225 billion in revenue for fiscal 2030, representing a 31% compound annual growth rate. That’s above the $18.92 EPS and $198.39 billion in revenue that analysts surveyed by LSEG were expecting. Still, the stock slipped 2% in extended trading as investors digested the forecast and its ambitious timeline.

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