Oracle Corp. has achieved a significant milestone in its transformation into a cloud-computing powerhouse, with cloud revenue surpassing its traditional software licensing revenue for the first time. Oracle CEO Safra Catz highlighted this achievement during the company’s conference call with analysts following its better-than-expected fiscal third-quarter earnings report. The positive news spurred a 14% surge in Oracle’s shares during after-hours trading, closing at $130.50.
In the fiscal third quarter, Oracle reported a remarkable 24% increase in total cloud revenue, while software-licensing revenue experienced a 3% decline. Company executives underscored the sustained strong demand for Oracle’s cloud services and outlined plans to expand data center infrastructure to meet this growing demand, fueled in part by the increasing need for generative-AI infrastructure.
Catz emphasized the immense demand for Oracle’s cloud offerings, noting the influx of new customers yet to reach their full capacity. In response to inquiries about Oracle’s projection to nearly double capital spending to $10 billion by fiscal 2025, Catz clarified that this investment is essential for expanding and building out data centers.
Oracle co-founder and Chief Technology Officer Larry Ellison provided insight into one of the company’s major projects—a massive data center currently under construction in Salt Lake City. Ellison described the scale of the facility, highlighting its capacity by comparing it to the size of eight Boeing 747 airplanes parked nose-to-tail.
Oracle is attracting significant interest from governments aiming to establish sovereign clouds, specialized cloud infrastructures tailored to meet the stringent security requirements of government entities and institutions.
Despite projecting a robust 22% to 24% increase in total cloud revenue for the fiscal fourth quarter, Oracle CEO Safra Catz provided guidance for non-GAAP earnings to remain relatively flat, with a range between a 2% decrease and no change, at $1.62 to $1.66 per share. Catz attributed this outlook to the increasing utilization of Oracle’s cloud capacity, which is expected to drive margins higher. Additionally, the company may be experiencing an impact from its substantial investment and focus on offering competitive pricing for cloud services.
With its extensive data-center expansion and achievement of revenue crossover, Oracle now solidifies its position as a significant player in the cloud computing arena. However, the sustainability of this demand remains a key concern for investors, particularly as they seek opportunities beyond traditional chip makers like Nvidia Corp. that stand to benefit from the growing adoption of artificial intelligence (AI) technologies.