Oracle raises cloud revenue forecast as it spends more on data centers

In short: Oracle lifted its forecast for cloud revenue growth this year as it spends heavily to build more data center capacity for AI deals.

What happened

Oracle said it now expects revenue in its cloud business to grow 64% to 70% year over year. That was higher than analysts expected, according to the Financial Times.

The company also reported revenue of $19.3bn for the three months ending in August, up 30% from a year earlier. Net income, which is profit after costs and taxes, was $4.7bn. Oracle shares rose nearly 6% in after-hours trading.

A key reason is spending. Oracle said capital expenditures were $28.5bn in the quarter, up from $8.5bn a year earlier. Capital expenditures are big, long-term purchases like buildings and equipment, in this case data centers (warehouses full of computers that run online services, similar to a power station but for internet apps).

Oracle is trying to compete with larger cloud companies like Amazon and Google. It has been investing to support fast-growing demand for AI, and to deliver the computing capacity needed for large AI contracts, including work tied to companies like OpenAI.

Oracle previously told investors it planned to invest $70bn in the coming fiscal year to fund data center construction, up from $55.7bn in the year ended May 31.

Why it matters

This is another sign that the race to build AI-ready data centers is getting more expensive. It can also carry financial risk, since Oracle’s credit rating was downgraded by S&P in July to one notch above junk status, partly due to reliance on a small number of customers and questions about profits in its AI data center business.

Source: Financial Times