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Was it something they said? Oracle shares fell 7% on Friday, a day after the software and cloud firm offered investors bullish growth projections for the next five years, both for revenue and for profits. In Oracle’s ideal world, those projections would have put to rest concerns about the cost of its artificial intelligence cloud expansion, which is driving the revenue growth. But as we noted on Thursday, the projections lacked plenty of key details, such as expected gross margins for the whole company and how much capital spending Oracle expects to undertake in the next few years. Those gaps might have undermined its arguments a bit.
Still, the stock remains 20% above the level it was trading at on Sept. 9, right before the company issued projections about the enormous growth its AI cloud business will enjoy through 2030 (projections it has now revised upward). Among the bulls on the stock is TD Cowen analyst Derrick Wood, who appeared on The Information’s TITV on Friday, noting that the 2030 earnings per share projection was well above what Wall Street was expecting. He suggested the sell-off might have reflected the fact that the fiscal 2028 EPS projection was lower than what analysts were expecting. But Oracle doesn’t exist in a vacuum—and some investors are comparing its AI cloud expansion to Microsoft’s.
As we noted in this deep dive this week, Microsoft, which is OpenAI’s primary cloud provider, has taken a judicious approach to building data centers, at least partly out of concerns that building as many data centers as OpenAI wanted could put Microsoft at risk of overextension—possibly hurting its financial return. One investor told us they prefer Microsoft’s capital expenditures strategy to Oracle’s. Microsoft shares are trading at a discount to Oracle’s on a forward revenue basis, according to S&P Global Market Intelligence, which to some investors surely makes Microsoft the better bet.
Still, there are ways for Oracle to reduce its risk—for instance, by trying different financing techniques. On TITV, Wood noted that Oracle could either borrow money or lease the chips. That’s what Elon Musk’s xAI is doing, as we reported this week (OpenAI is considering the same idea). Or perhaps Oracle will get financial help from chip suppliers such as Nvidia, as OpenAI is getting (see our story about Nvidia’s OpenAI arrangement). Wood suggested the uncertainty about how Oracle will finance its AI data center expansion is why the company didn’t give capex projections.
Benioff’s Week
This wasn’t just a big week for Oracle. It was also Salesforce’s time to shine with its annual sales conference, Dreamforce, which takes over much of San Francisco. CEO Marc Benioff, as he always does, took the stage in front of thousands of customers to talk about upcoming products and to chat with big-name executives from other companies (see our coverage of the event).
News coverage of this year’s event was overshadowed somewhat by a firestorm sparked by Benioff’s comments last Friday suggesting President Donald Trump should send the National Guard to San Francisco. Benioff backed off from that idea on Friday, but he likely had a strategy in making the comments. As The New York Times reported on Thursday, Salesforce is pitching ICE on using its AI.
In other words, Benioff, like a lot of tech CEOs, was probably trying to win over Trump to get more government business. Perhaps he’s thinking Salesforce should follow in the footsteps of Palantir, another software firm that has made serving government interests the core of a successful business. Palantir stock, by the way, is up 136% this year, while Salesforce shares are down 27%, according to Koyfin.
In Other News
• Proxy adviser Institutional Shareholder Services on Friday urged Tesla shareholders to reject a proposed pay package for CEO Elon Musk that could be worth up to $1 trillion.
• Google formally ended on Friday its five-year old effort aimed at ending the use of cookies in its Chrome browser. In a blog post, Google said it would retire a suite of technologies called the Privacy Sandbox that were originally designed to replace cookies. Advertisers use cookies to help track people’s Web surfing so they can figure out who is seeing their ads.
Today on The Information’s TITV
Check out today's episode of TITV in which we unpack the stampede of venture capital firms entering the AI rollups game.
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