Oracle’s Upbeat Quarter Calms Investors

Oracle managed to calm some frayed nerves on Wall Street on Tuesday. The cloud and software firm, which has become a focal point for investors’ anxiety about AI-related spending, reported slightly better than projected revenue for its February quarter. More importantly, for the second time in two quarters, it raised its revenue projection for next fiscal year, which starts in June. Oracle now projects revenue in fiscal 2027 to rise 34%, more than twice this year’s likely growth and four times its average top-line growth since 2021. Its battered shares rose 9% in after-hours trading. 

What has stressed out investors—and cut the stock in half over the past six months—is that Oracle has borrowed tens of billions to build out data centers for customers such as OpenAI whose ability to pay for services a few years into the future likely rests on future fundraising. Oracle tried to assure investors all was fine: It pointed out that “some of the largest consumers of AI cloud capacity have recently strengthened their financial positions quite substantially,” a reference to its recently announced $110 billion fundraising. OpenAI doesn’t get that money all at once, however. And one of the investors in the funding round, SoftBank, is itself trying to borrow the money it needs for its OpenAI investment, according to Bloomberg. The AI build-out is a bit of a financing chain.