Oracle’s contractual obligations have surged to $455 billion, marking what analysts see as a structural shift in demand. Management forecasts cloud infrastructure revenues will climb from $18 billion this year to $144 billion by 2030. The execution risks are significant, however, with capital expenditures rising to $35 billion and free cash flow under pressure.
Jacob Falkencrone, chief investment strategist at Saxo, noted that Oracle surprised Wall Street on Tuesday.
A company long seen as a latecomer to the cloud published results that looked unremarkable at first glance—yet its stock price jumped almost 30% in after-hours trading. The reason? A wave of new artificial intelligence (AI) contracts that instantly transformed the company’s outlook.
The Catalyst: A Number That Redrew the Chart
The key figure was the $455 billion in Remaining Performance Obligations (RPO)—essentially future contracted revenues. That represents a 359% year-over-year increase, fueled by several multi-billion-dollar deals with clients such as OpenAI, Meta, and Nvidia.
“When a company’s backlog quadruples in a year, it signals not just momentum but a structural shift in demand,” Falkencrone explained.
Based on these contracts, Oracle projects cloud infrastructure revenues to rise from $18 billion in 2024 to $144 billion in 2030. This isn’t ordinary growth—it’s an entirely new trajectory. For a company once considered late to the cloud, it is nothing short of revolutionary.
The Quarter: Average Numbers, Impressive Backlog
On paper, Oracle’s quarterly results looked modest. Revenue grew 12% to $14.9 billion, slightly below forecasts. Earnings per share came in at $1.47, a cent short of expectations. Normally, such results would drag the stock lower. This time, however, the backlog told a completely different story—an unmistakable “mic drop” moment that silenced years of skepticism.
Why AI Is Choosing Oracle
Why are the world’s most demanding AI companies turning to Oracle? The answer lies in speed and resource availability. Oracle is building gigawatt-scale data centers optimized for AI workloads, equipped with Nvidia processors and ultra-fast data transmission networks that outperform rivals.
Another underappreciated driver is the company’s multicloud database offering. Revenues in this segment jumped over 1,500% year-on-year, as Oracle databases became widely available on AWS, Azure, and Google Cloud. This allows Oracle not only to compete with hyperscalers but also to partner with them, embedding itself in their ecosystems while riding the AI wave.
The biggest potential revenue source, however, could be AI inference—running models after training. Founder Larry Ellison has argued that inference could be larger than training itself. With millions of enterprise databases, Oracle is uniquely positioned to monetize that demand.
Oracle’s Place Among Cloud Leaders
Despite the euphoria, Oracle’s cloud business remains small compared with Amazon and Microsoft. AWS generated over $100 billion last year, while Azure reached roughly $75 billion. Oracle’s $18 billion still makes it a challenger—but the new contracts could meaningfully close the gap.
Risks and Costs: The Price Tag
The catch? Costs. Oracle plans $35 billion in capital expenditures this year—far more than initially projected. Free cash flow is already negative as money flows into servers and data centers. The company is sprinting to meet demand—a race that, while thrilling, can also drain resources.
What Comes Next: Catalysts to Watch
For investors, the focus now is less on the past quarter and more on execution going forward. Four factors will be key:
- Contract conversion – how quickly backlog turns into revenues.
- Investment discipline – whether margins hold up amid rising spend.
- AI partnerships – OpenAI and Nvidia remain critical benchmarks.
- AI inference adoption – the new AI layer could be Oracle’s ace card.
Two broader lessons emerge:
- Tech giants can pivot far faster than expected when a transformative wave reshapes the market.
- Wall Street often forgives weaker quarterly results if the long-term narrative is compelling enough.
From Database Provider to AI Infrastructure
For decades, Oracle was a reliable yet uninspiring supplier of enterprise databases. Today, with AI contracts flooding in, it is becoming a core pillar of global artificial intelligence infrastructure. The road ahead will be bumpy—capital-intensive, fiercely competitive, and execution-dependent. For now, though, Oracle has captured the market’s imagination.
Jacob Falkencrone
Source: CEO.com.pl
