Huma Siraj
New York: A CIA contract to develop a database program code-named Oracle, later the business’s name was a huge break for a startup company started by Larry Ellison and two other computer programmers in the late 1970s.
This is the latest significant development for the database and corporate software behemoth, which was founded almost 50 years ago. With its cloud computing business helping to supply the pressing need for processing capacity for AI applications, it has emerged as a major player in the artificial intelligence boom.
Oracle’s stock surged after the company revealed its latest earnings report last week, which included astounding growth expectations for its cloud division. Since the beginning of this year, Oracle’s (ORCL) stock has increased by over 80%, surpassing Microsoft, Nvidia, Google, and Meta.Ellison, who is currently the company’s chairman and top shareholder, momentarily became the richest person in the world as a result of the spike.
Oracle’s recent ascent is an illustration of how Silicon Valley titans are finding new life and opportunity in the AI era, much like Nvidia, which was seen as a niche gaming processor business prior to its introduction of essential AI processors.
Daniel Morgan, senior portfolio manager at Synovus Trust Company, described it as a “watershed moment for Oracle,” drawing a comparison to the time when Nvidia’s AI chip division started to surpass its gaming division. Oracle was a business that was sort of stumbling and trying to figure things out a year ago.We now have overwhelming evidence that its method is working.
Additionally, if Oracle is involved in an agreement to hand over ownership of the US operations of the well-known social media app TikTok to an American company, it might add another feather to its cap. A framework for such an agreement is almost final, according to White House officials on Monday, pending a Friday meeting between Chinese President Xi Jinping and President Donald Trump.
Although the identity of the potential buyer in the transaction is unknown, Oracle was formerly thought to be a strong candidate to acquire the app. In an attempt to allay US national security concerns, Oracle started hosting TikTok’s US data in 2020.
Additionally, Oracle could gain access to one of the most well-known apps in the world, along with its 170 million American users and associated ad income prospects, by assuming full or partial control of TikTok’s US operations.
For this report, Oracle chose not to comment.
From Cloud Latecomer to Key Industry Player
Oracle lagged behind major cloud computing rivals like Microsoft Azure, Google Cloud, and Amazon Web Services. In 2008, Ellison even referred to the technology as “complete gibberish.”
Oracle’s cloud computing business started to turn a corner in 2022, the year ChatGPT went public, when AI companies realized that building out their large language models would require massive computing power, even though it is still smaller than those other “hyperscalers,” Morningstar equity analyst Luke Yang told CNN.
He went on to say that Oracle had simpler access to the highly sought-after AI chips needed to support its expanding data center business because of its tight partnership with Nvidia.
Oracle CEO Safra Catz stated during last week’s earnings call that the company’s cloud infrastructure revenue is anticipated to increase by 77% to $18 billion in its fiscal year 2026 and reach $144 billion by 2030.
This is mostly due to a sharp increase in “Remaining Performance Obligations” (RPOs),or contracted future revenue that the business anticipates collecting. In the most recent quarter, RPOs increased 359% year over year to $455 billion. According to Catz, throughout the quarter, the business inked four multibillion-dollar contracts with three distinct clients.
Oracle is “Living the AI dream,” according to Brian White, a tech analyst at investment firm Monness, Crespi, Hardt & Co., who described the situation as a “shooting fish in a barrel” moment since demand for data center capacity in the AI sector continues to exceed supply.
Oracle’s strong alliance with OpenAI has contributed to its legitimacy as a player in the AI computing market. Ellison declared in January that Oracle will become a part of a $500 billion plan to establish a new business, Stargate, to invest in expanding AI infrastructure in the US.
Because Oracle isn’t developing its own extensive language model, which would normally take up some of its data center space, it may even have an advantage over other big data center competitors like Google or Microsoft, allowing it to rent out more computing power. According to Yang, “that is doing the company and the entire AI ecosystem a favor.”
Additionally, Oracle has benefited from relatively consistent growth in its core database and software businesses, which has allowed it to continue the capital-intensive process of expanding the capacity of its data centers. In the first quarter alone, the business announced capital expenditures of around $27 billion.
According to Morgan, “Roughly 70% of their revenues” come from those flagship business groups. It will be the cherry on top for them if they can achieve some success with the data center and the infrastructure as a service (businesses). They don’t rely on it to survive.
Oracle will still require AI Businesses to keep investing in more processing capacity if it is to meet its ambitious growth goals, despite some industry observers starting to doubt the returns on those costly expenditures.
Oracle may be more negatively impacted than the other three hyperscalers since it is a relatively minor player in the ecosystem as a whole, Yang stated. “We do see a scenario where total AI demand undershoots our expectations,” Yang added. “Those RPOs may not become as important as they are now if AI does not develop as quickly as we anticipate.”
