Oracle’s shares fell more than 10% in after-hours trading on Wednesday after the company reported quarterly revenue that came in below Wall Street expectations, adding pressure to concerns about whether recent enthusiasm for AI-related investments may be fading.
Quarterly Revenue Results and AI-Driven Growth
For the three months ending in November, Oracle reported revenue of $16.06bn (£11.99bn), short of analyst projections of $16.21bn. Revenue grew 14% overall, with the company highlighting a 68% jump in sales at Oracle Cloud Infrastructure (OCI), its AI-focused business unit. OCI supplies infrastructure to major AI technology developers, whose demand contributed to Oracle’s stock reaching record highs earlier this autumn. Despite that momentum, the latest earnings report did not ease investor concerns about a potential AI bubble.
Impact of OpenAI Contract and Market Shifts
In September, Oracle secured a heavily sought-after deal with ChatGPT-maker OpenAI, which agreed to purchase $300bn in computing power from Oracle over five years. The announcement briefly pushed Oracle chairman and chief technology officer Larry Ellison to the top position on global wealth rankings. However, the company’s shares have since fallen 40% from their peak three months ago, though they remain more than one-third higher than at the beginning of the year.
In a statement issued Wednesday, Ellison said, “There are going to be a lot of changes in AI technology over the next few years and we must remain agile in response to those changes.” He also described a policy of “chip neutrality,” saying Oracle would buy whatever GPUs customers prefer. “We will continue to buy the latest GPUs from Nvidia, but we need to be prepared and able to deploy whatever chips our customers want to buy,” he wrote.
Investor Concerns About AI Exposure and Debt Levels
Oracle’s AI infrastructure partnerships, including its OpenAI arrangement, have prompted scrutiny over whether large players in the sector are engaging in forms of circular financing, where companies help fund purchases of their own products or services through intertwined investment arrangements. Emarketer analyst Jacob Bourne said after the report’s release that investors are weighing Oracle’s level of exposure to OpenAI amid questions about the AI developer’s profitability. He also noted rising concerns about Oracle’s debt position, which has grown as the company expands its data centre footprint.
Oracle raised a record $18bn in a major bond sale in September, one of the largest debt issuances recorded in the tech industry. “Although Oracle’s shares are buoyed by its September surge, this revenue miss will likely exacerbate concerns among already cautious investors about its OpenAI deal and its aggressive AI spending,” Bourne said.
Broader Business Activity
The Ellison family, known supporters of US President Donald Trump, recently purchased Paramount and has led a bid to acquire Warner Brothers Discovery, adding to their growing influence across media and entertainment.
Featured image credits: Flickr
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