After Oracle's latest quarterly results exceeded market expectations, its stock price rose before trading on Friday. The core factor driving the improvement in performance came from the growth of its AI-related cloud business, which also alleviated some of the market's concerns regarding its high capital expenditures and debt burdens.
AI Cloud revenue growth accelerates
The company disclosed that Oracle's cloud infrastructure (OCI) revenue increased by 121% year-over-year, reaching $7.4 billion. Overall cloud business revenue also increased by 62% year-over-year, to $11.61 billion.
Oracle also stated that this quarter, it added more than $30 billion in AI cloud contracts, pushing the remaining performance obligations to $664 billion. For cloud vendors, this metric typically reflects the scale of future revenue to be recognized.
300,000 GPU have been delivered.
In terms of computing power supply, Oracle stated that since the end of the previous quarter, they have delivered over 300,000 GPU units to AI cloud customers and added 850 megawatts of data center capacity.
The company also stated that the demand for AI training and inference services still exceeds the current supply. This means that its expansion pace will continue to be relatively fast, with a focus on further investing in computing power and data center infrastructure construction.
Capital expenditure remains high
However, rapid expansion also comes with higher expenses. The quarterly capital expenditure of Oracle's business unit increased to $28.5 billion, compared to $8.5 billion in the same period last year. As a result, the company's free cash flow was approximately negative $5.4 billion.
Nevertheless, Oracle has maintained its annual capital expenditure guidance unchanged, expecting it to remain between $90 billion and $95 billion. Previously, the market was concerned that after the company's substantial investment in AI infrastructure, the speed at which revenue is realized might not keep up with the growth in expenditures.
This performance and contract data have at least alleviated such concerns in the short term. Nevertheless, the market will continue to pay attention to whether the backlog of orders can be further converted into actual revenue, as well as the ongoing impact of high-intensity investments on cash flow.
