Brief Summary

Oracle shares surged 39% in early trading Wednesday after the software company announced several billion-dollar contracts in its latest quarter ending August 31. The deals, including four multibillion-dollar agreements with three customers, highlight Oracle’s growing role in the artificial intelligence boom. CEO Safra Catz reported a $455 billion backlog in contract revenue, up over fourfold from last year. Analysts suggest this positions Oracle to meet ambitious cloud growth targets. While revenue forecasts are strong, concerns remain about narrow operating margins due to high capital spending. More major contracts are expected in coming months.

The big picture

• Oracle’s $455 billion contract backlog positions it to achieve significant cloud infrastructure sales growth, per analysts at Melius.
• The AI boom offers Oracle a second chance after missing the initial cloud computing wave over the past decade.
• Partnerships with tech giants like Microsoft, Google, and Amazon enhance Oracle’s cloud offerings for AI developers.
• Revenue from AI-focused clients like xAI and Meta Platforms is expected to drive growth beyond 2026, according to analysts.

Driving the news

• Oracle shares jumped 39% in early trading on Wednesday after reporting major contract wins.
• Oracle signed four multibillion-dollar contracts with three different customers in the quarter ending August 31.
• CEO Safra Catz announced a $455 billion backlog in contract revenue, up over fourfold from the prior year.
• Shares rose over 30% in off-hours trading, continuing gains Wednesday for a potential record one-day increase.
• Cloud revenue increased 28% to $7.2 billion, while total revenue rose 12% to $14.93 billion for the fiscal first quarter.

Zoom out

• Oracle, founded 48 years ago, built its reputation on relational database software before pivoting to cloud computing.
• The company initially lagged in the tech industry’s shift to cloud computing over the past decade.
• Close ties between CTO Larry Ellison and leaders like Elon Musk (xAI) and Jensen Huang (Nvidia) have secured key deals.

What they’re saying

• “It was an astonishing quarter—and demand for Oracle Cloud Infrastructure continues to build.” — Safra Catz, CEO
• “Most of the revenue in this five-year forecast is already booked in our reported [remaining performance obligations].” — Safra Catz, CEO
• “At best, Oracle is operating their virtual machines or GPU rental business at single-digit operating margins.” — Analysts at Davidson

By the numbers

• Oracle shares surged 39% in early trading on Wednesday.
• Contract revenue backlog stands at $455 billion for the quarter ending August 31.
• Cloud revenue grew 28% to $7.2 billion in the fiscal first quarter.
• Total revenue rose 12% to $14.93 billion, missing analyst targets of $15.04 billion.
• Cloud-infrastructure revenue is projected to grow 77% to $18 billion this fiscal year.

What to watch

• Several multibillion-dollar customers are expected to sign contracts in the next few months, per CEO Safra Catz.
• Remaining performance obligations are projected to exceed $500 billion with new deals.
• Cloud-infrastructure revenue forecasts aim for $144 billion by the fifth fiscal year ahead.

Evidence Table