Oracle’s strong quarter suggests Big Red is benefiting across the board from the “halo” effect of its AI infrastructure business growth.
The company posted a profit of $3.72 billion for the third quarter, up from $2.94 billion the year prior and raised its sales outlook for the fiscal year 2027.
Investors were on edge going into the earnings call on Tuesday as Oracle piled on debt to finance building infrastructure for its AI cloud computing deals.
However, AI demand has continued to outstrip supply and Oracle's "BYO" hardware approach is reducing cash flow impact, it said.
Oracle CEO Clay Magouyrk told investors, “A combination of bring-your-own-hardware and upfront customer payments enables us to continue expanding without any negative cash flow from Oracle Corporation.”
The company added $29 billion in new contracts this quarter.
The halo effect
Oracle’s multicloud database and AI infrastructure were standout segments, jumping 531% and 243% year-over-year respectively.
After traditionally only allowing Oracle Database to run on its own cloud, over the past 18 months the company has become "multicloud."
"We now have 33 regions live with Microsoft and 14 live with Google. We delivered significant growth with AWS, beginning Q3 with two AWS regions live, exiting Q3 with eight AWS regions live; we will exit Q4 with 22 AWS regions live," said Magouyrk.
“We absolutely are seeing a halo effect,” Oracle’s co-CEO Mike Sicilia, said about the impact of AI investment on their other business lines.
Revenue for key enterprise software segments, such as cloud applications and ERP, jumped double digits over the quarter.
Sicilia suggested the effect was because the company is building applications in tight tandem with the AI model vendors they are supporting in the cloud. The CEO said Oracle is "serving the model vendors for training" while "also embedding a lot of the output right into our application cores."
Sicilia said the combination of holding “so much of the world's mission-critical data” and close proximity to AI models means their SaaS products can create faster ROI on AI use-cases.
Larry Ellison jumped in at the end of the call to emphasize Oracle’s AI integrations, specifically its agent workflows for ecosystem-wide automation, put the company in a unique position. “That is why we think the SaaS apocalypse applies to others, but not to us,” Ellison said. Punching down at smaller SaaS vendors was a reoccurring theme during the call.
Wild ride
Oracle’s AI infrastructure rollercoaster seems to be on an upward climb for the time being, but the vast majority of data centre costs have yet to land and data centre buildout is a long process.
Magouyrk noted the impact of AI data centre construction costs, “as our business is going through this hypergrowth phase, that is the only drag on profitability.” Oracle also acknowledged the complex roadmap to getting AI compute online, with vague promises it plans to “innovate” at each stage.
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