Oracle shares slide on $15B increase in data center spending

"Oracle's Big Tech rivals such as Amazon, Microsoft, and Google have helped reassure investors about their large capital investments by posting strong earnings from their vast cloud units. But in the last quarter, Oracle's cloud infrastructure business, which includes its data centers, posted worse than expected revenues of $4.1 billion. Ellison's company is also relying more heavily on debt to fuel its expansion. Net income rose to $6.1 billion in the quarter, boosted by a $2.7 billion pre-tax gain from the sale of semiconductor company Ampere to SoftBank. The company added an additional 400 MW of data center capacity in the quarter, Magouyrk told investors."

"Construction was on track at its large data center cluster in Abilene, Texas, which is being built for OpenAI, he added. Magouyrk, who took over from Safra Catz in September, said there was ample demand from other clients for Oracle's data centers if OpenAI did not take up the full amount it had contracted for. "We have a customer base with a lot of demand such that whenever we find ourselves [with] capacity that's not being used, it very quickly gets allocated," he said."

"Investors and analysts have raised concerns in recent months about the upfront spending required by Oracle to honor its AI infrastructure contracts. Moody's in September flagged the company's reliance on a small number of large customers such as OpenAI. Morgan Stanley forecasts that Oracle's net debt will soar to about $290 billion by 2028. The company sold $18 billion of bonds in September and is in talks to raise $38 billion in debt financing through a number of US banks."

Oracle's cloud infrastructure revenue was $4.1 billion last quarter and the company added 400 MW of data center capacity. Net income rose to $6.1 billion, helped by a $2.7 billion pre-tax gain from selling Ampere to SoftBank. Construction is progressing at a large Abilene, Texas data center being built for OpenAI, with executives saying other clients can absorb unused capacity. Heavy upfront spending for AI infrastructure has triggered investor and ratings concerns, and Morgan Stanley projects net debt near $290 billion by 2028 amid recent $18 billion bond sales and ongoing financing talks. Software revenue of $5.9 billion provided some cushion.

Read at Ars Technica