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Bearish sentiment about the cost-benefit equation of artificial intelligence has become so prevalent lately that it almost feels like conventional wisdom is now skepticism. But that certainly isn’t the case at Oracle, the nearly 50-year-old enterprise software firm turned cloud provider, which declared itself today to be a “hypergrowth company,” thanks to its fast-expanding AI data center business.
And that wasn’t just rhetoric: Oracle presented an updated revenue forecast at an investor presentation showing growth hitting a high of 53% by fiscal 2028, up from 8.4% last fiscal year. The company even updated the bullish numbers that sent the stock soaring last month, projecting that revenue from its cloud business would hit $166 billion in fiscal 2030—up from just $10 billion in the most recent fiscal year. (See our detailed report here).
You can understand, then, why Oracle’s executive chair, Larry Ellison, was in a jovial mood in his onstage appearance, even as his commentary meandered into wheat genomics and a robot-controlled greenhouse, which isn’t actually part of Oracle. (Ellison went on to note that the greenhouse could work on Mars, adding jokingly that Oracle’s business projections didn’t include the possibility of deploying it on the red planet.) More to the point, Oracle executives tried to put to rest questions about how the company’s shift to AI data centers would affect profits. Those data centers are, after all, inherently less profitable than the software that remains the company’s core business.
On that point, The Information earlier this month reported that Oracle’s AI data center business had recorded a gross margin of 16% for the past five quarters, sparking a sell-off in Oracle stock, given that Oracle’s overall gross margin is around 70%.
But Oracle co-CEO Clay Magouyrk projected on Thursday that the gross margin from its AI data center business would be closer to 35% over the next few years. Other parts of the cloud business, which aren’t growing as fast, have even higher margins, he said. Overall, Oracle projected it would earn $21 a share by 2030 on revenue of $225 billion. That compares with $6 of earnings per share in the year to May on revenue of $57 billion.
There were enough gaps in Oracle’s projections to make analysis difficult. For instance, while Oracle ran through the different margin profiles and growth rates of its cloud business segments, we didn't learn how big each segment was. Magouyrk also acknowledged some uncertainty about the margins for AI data center cloud, given how the cost of chips varies based on type, among other things. Even the time frame for the projected AI cloud margins was a little fuzzy.
We also got no details about future capital expenditures to develop the new data centers. Capex spending at Oracle has lately risen so high that Oracle as a company burned cash last fiscal year. Analysts expect Oracle to burn $7.5 billion in cash a year for the next three years, according to S&P Global Market Intelligence. (For comparison, in fiscal 2024, it generated $11.8 billion.) And despite the earnings per share and revenue forecasts, Oracle didn’t offer a gross margin forecast for the overall company. Perhaps the lack of details explains investor reaction: Oracle stock closed up 3% but fell 2% after hours.
Waymo’s Spreading Tentacles
Alphabet’s self-driving–car business, Waymo, is expanding its presence. Waymo is now well established in ride hailing—both on its own and operating on Uber’s service. It unveiled a partnership with restaurant-delivery service DoorDash on Thursday.
Under this arrangement, Waymo vehicles will deliver DoorDash orders in the Phoenix area, presumably the start of something that could be much bigger. One question: How will DoorDash customers get their food from Waymo? Its blog post suggested customers would have to leave their house and open the trunk of the car with an app. Shock and horror! People have to get off the couch? What is Waymo thinking?
In Other News
• CoreWeave has hired Jon Jones, former head of Amazon Web Services’ global startups and venture capital business, as its first chief revenue officer, the company confirmed Thursday.
• Ron Conway, venture capitalist and major Democratic party donor, has left the board of the Salesforce Foundation. He criticized Salesforce CEO Marc Benioff for his recent comment calling on President Donald Trump to deploy the National Guard to San Francisco.
• Microsoft is adding new AI features to its forthcoming Windows 11 operating system that will let users speak to their computers to automate tasks like locating and editing files, organizing tabs and managing calendar events, the company announced on Thursday.
• Taiwan Semiconductor Manufacturing Co. said it is preparing for a faster upgrade of its Arizona plant’s technology to the advanced 2-nanometer process. The chipmaker is close to securing a second large plot of land near the current site to expand the U.S. plant’s capacity.
Today in The Information’s TITV
Check out today’s episode of TITV in which we discuss our inside reporting on how xAI plans to finance its extraordinary data center ambitions in Memphis.
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