Oracle data centre revenue rises as AI infrastructure spending intensifies

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Oracle data centre AI growth

Highlights

Oracle's data centre revenue reached $7.4bn in the last quarter and total revenue rose 30 per cent to $19.3bn, exceeding analyst forecasts.
Cloud unit growth is projected to accelerate to 64 per cent to 70 per cent year on year, driving a 7 per cent after-market share price jump.
Oracle's capital expenditures surged to $28.5bn in the quarter, contributing to negative $5bn free cash flow and an S&P credit downgrade to one notch above junk.

Quarter results and cloud growth outlook

As reported by Financial Times, Oracle says its data centre business generates $7.4bn in revenue in the last quarter, while growth in its broader cloud unit is expected to accelerate to 64 per cent to 70 per cent year on year, ahead of analysts' estimates.

Total revenue rises 30 per cent to $19.3bn in the three months to the end of August from a year earlier, which Oracle says is driven by continued broad-based demand in Cloud Infrastructure and Cloud Applications. The company also reports net income of $4.7bn, and its shares jump 7 per cent in after-market trading.

The results indicate Oracle's costly effort to shift from business software into AI infrastructure provision is starting to gain traction as it works to serve customers such as OpenAI.

Capital demands and financial pressure

Oracle is continuing to stretch its balance sheet as it tries to keep pace with larger cloud rivals including Amazon and Google in the race to build AI infrastructure. Capital expenditures reach $28.5bn in the quarter, sharply above expectations and up from $8.5bn a year earlier.

The Austin, Texas-based company previously tells investors it will invest $70bn in the coming fiscal year to fund data centre construction, up from $55.7bn in the year ended May 31. It also says it has completed a previously announced $20bn share sale as part of a $50bn financing package for data centres, alongside a large bond sale.

S&P downgrades Oracle's credit in July to one notch above junk status, citing dependence on a small number of customers and an uncertain route to profitability in its AI data centre operations. Oracle also says free cash flow for the first quarter is negative $5bn as cash continues to be consumed by data centre investment.

Our earlier article on the rebound in software stocks showed how leading SaaS providers are starting to turn AI features into a tangible revenue driver after fears that AI would weaken subscription-based models. We noted that firms like Salesforce, Snowflake and Workday are embedding AI into products and experimenting with new pricing approaches, even as valuations and competitive risks remain uneven across the sector.

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