Oracle's Cloud Business Ignites as Surging AI Demand Fuels Unprecedented Growth

Oracle has achieved a significant landmark in its transformation into a cloud-computing entity, with its cloud revenue exceeding traditional software licensing for the first time. CEO Safra Catz highlighted this achievement during the company's fiscal third-quarter earnings call with analysts, where Oracle also reported earnings that surpassed expectations.

In the quarter, the company experienced a 24% surge in total cloud revenue, contrasting with a 3% decline in software-licensing revenue. Executives discussed the persistent robust demand for Oracle's cloud services and mentioned the expansion of data centers to meet this growing demand, partly driven by the increasing requirements for generative-AI infrastructure.

Oracle plans to nearly double its capital expenditures to $10 billion by fiscal 2025 to construct new data centers and expand existing ones. Co-founder and CTO Larry Ellison highlighted the scale of this expansion by describing a vast data center being built in Salt Lake City, large enough to fit eight Boeing 747s in a line.

Additionally, Oracle is attracting significant interest from governments seeking to establish sovereign clouds, tailored for the specific security needs of government agencies. With this substantial data center expansion and a shift in revenue, Oracle is solidifying its status as a key player in the cloud industry. However, the sustainability of this demand is a crucial question for investors looking beyond traditional chip manufacturers like Nvidia to benefit from the AI boom.

When questioned about the potential for Oracle to face the same graphics processing unit (GPU) shortages that are affecting other tech firms, both Catz and Ellison assured that Oracle is well-prepared, indicating that electricity and connectivity pose greater challenges for them.