Oracle(US:ORCL) Finbold·2025-10-07 17:01Core Viewpoint - Oracle's stock has experienced a significant decline due to concerns over its profitability in the artificial intelligence segment, despite previous optimism surrounding its AI cloud deals [1][4]. Financial Performance - Oracle generated approximately $900 million in revenue from renting Nvidia-powered servers in the three months ending in August, but only achieved a gross profit of $125 million, resulting in a 14% profit margin [2]. - The company's AI cloud sales nearly tripled year-over-year, yet profit margins have been inconsistent, fluctuating between below 10% and slightly above 20%, with an average around 16% [2]. Losses and Profitability Challenges - Oracle reportedly faced significant losses from renting smaller quantities of both new and older Nvidia chips, with potential profitability dropping by an additional seven percentage points when accounting for depreciation [3]. - In the most recent quarter, Oracle incurred a loss of $100 million from renting Nvidia's latest Blackwell chips [3]. Market Reaction and Stock Performance - Following the announcement of substantial AI cloud contracts, including a five-year, $300 billion deal with OpenAI, Oracle's stock had previously surged, but the recent sell-off marks a sharp reversal from those highs [4][5]. - The company disclosed a contract backlog of $455 billion, which is up more than 350% year-over-year, and projected that cloud infrastructure revenue could increase from $18 billion this fiscal year to $144 billion by 2030 [4].