Core Insights - Oracle has disclosed profit margin expectations for its large AI infrastructure project, alleviating investor concerns about the profitability of this key new business [1] - The company presented a specific case at its annual investor conference, indicating a six-year AI infrastructure project with total revenue of $60 billion and a gross margin of 35% [1] - Despite signing numerous AI data center development agreements with clients like OpenAI, Meta, and Musk's xAI, Wall Street had previously questioned the profitability of such ventures, noting that some AI cloud services had a gross margin of only 14% [1][2] Financial Performance - Oracle's cloud business faced scrutiny due to lower profit margins, attributed to the rental of advanced chips from NVIDIA, which exerted pressure on profitability [4] - In the last fiscal quarter ending August, Oracle reported $900 million in server rental revenue with a gross profit of $125 million, resulting in a gross margin of 14%, significantly lower than the approximately 70% gross margin of Oracle's traditional software business [4] - The company experienced substantial losses in certain cases, such as nearly $100 million in losses from renting NVIDIA's new Blackwell architecture chips in the previous fiscal quarter [4] Market Reaction - Following the disclosure of the new data, market confidence in the profitability of Oracle's AI infrastructure business increased, leading to a stock price surge of over 5%, although the gains later receded [2] - The positive sentiment also positively impacted the stock price of industry peer CoreWeave [2]

Core Insights - Larry Ellison, co-founder of Oracle, has reached a net worth of $393 billion, surpassing Elon Musk to become the world's richest person [1] Financial Performance - Oracle reported Q1 FY2026 revenue of $14.93 billion, a 12% year-over-year increase, but below market expectations of $15.03 billion [3] - Non-GAAP net income was $4.3 billion, an 8% increase year-over-year, with adjusted earnings per share at $1.47, slightly below the expected $1.48 [3] - Cloud revenue grew by 28% to $7.186 billion, accounting for 48% of total revenue, while software revenue declined by 1% to $5.721 billion [3] - Remaining performance obligations (RPO) reached $455 billion, a more than fourfold year-over-year increase and over threefold quarter-over-quarter increase [3][4] Strategic Developments - Oracle signed four contracts worth "tens of billions" with three major clients, with RPO expected to exceed $500 billion in the coming months [4] - The company has agreements with Amazon, Alphabet, and Microsoft to run Oracle's cloud services on their infrastructures [4] - Oracle anticipates cloud infrastructure revenue to grow by 77% to $18 billion this fiscal year, with projections to reach hundreds of billions in the next four years [4] AI Market Positioning - Oracle launched a new "AI database" aimed at dominating the AI inference market, ensuring user privacy through vectorized data storage [5] - The company is actively positioning itself to meet the growing demand for cost-effective AI cloud tools, as indicated by the surge in contract amounts [5] - Analysts suggest that despite Oracle's smaller cloud scale, investments in infrastructure will yield returns as large organizations adopt Oracle's cloud for their AI initiatives [5]

Core Viewpoint - Oracle's financial performance and strategic partnerships position it favorably in the growing AI and cloud computing markets, leading to a significant increase in its remaining performance obligations (RPO) and overall market valuation [3][4][5]. Financial Performance - For the first fiscal quarter of 2026, Oracle reported revenue of $14.93 billion, a year-over-year increase of 12%, but below market expectations of $15.03 billion [3]. - Non-GAAP net profit was $4.3 billion, up 8% year-over-year, with adjusted earnings per share at $1.47, slightly below the expected $1.48 [3]. - Cloud computing revenue grew 28% year-over-year to $7.186 billion, accounting for 48% of total revenue [3]. Remaining Performance Obligations (RPO) - Oracle's RPO reached $45.5 billion, a year-over-year increase of over four times and a sequential increase of over three times from $13.8 billion in the previous quarter [3][4]. - CEO Safra Catz indicated that RPO is expected to exceed $50 billion in the coming months due to significant contracts signed with major clients [4]. Strategic Partnerships and Market Position - Oracle has signed substantial contracts with AI companies such as OpenAI, xAI, and Meta, enhancing its cloud infrastructure offerings [4]. - The company has agreements with Amazon, Alphabet, and Microsoft to run its cloud services on their infrastructures, indicating strong market positioning [4]. Growth Projections - Oracle anticipates cloud infrastructure revenue to grow 77% year-over-year to $18 billion in the current fiscal year, with expectations of reaching over $100 billion in the next four years [4]. - The company raised its capital expenditure guidance from $25 billion to approximately $35 billion due to high demand [4]. AI Market Strategy - Oracle introduced a new "AI database" aimed at dominating the AI inference market, ensuring user privacy while providing access to advanced AI models [5]. - The company's stock price rose by 1.27% to $241.51, with a market capitalization of $678.36 billion, and it is projected to exceed $800 billion if the upward trend continues [5].