Oracle Sinks on Report Its Cloud Margins Are Lower Than Expected

Core Viewpoint - Oracle Corp. shares declined following reports indicating that the company's profit margin in its cloud computing segment is lower than Wall Street expectations [1][2]. Group 1: Financial Performance - Oracle generated approximately $900 million in revenue from server rentals powered by Nvidia chips in the three months ending in August, but only achieved about $125 million in gross profit [2]. - The company's overall gross margin was reported at 67.3%, marking the lowest level in over a year [5]. - Heavy expenditures on chip acquisitions and data center capacity have negatively impacted Oracle's gross margin [5]. Group 2: Market Reaction - Oracle's shares fell by as much as 7.1% on Tuesday, while Nvidia's shares decreased by about 0.6%, reversing an earlier gain of nearly 2% [2]. - Despite the recent decline, Oracle's shares have increased over 60% this year due to rising demand for artificial intelligence computing [4]. Group 3: Strategic Developments - Oracle has signed a deal with OpenAI to supply 4.5 gigawatts of data center capacity, sufficient to power millions of American homes [6]. - The company is also part of a consortium nearing an agreement to acquire the US operations of TikTok [6].