Oracle share price shoots up 8.7% after explosive growth in AI cloud

Oracle shares rose almost 9 percent in after-hours trading after the company presented strong quarterly figures. The demand for cloud infrastructure for artificial intelligence in particular appears to be growing explosively.

The results suggest that the demand for computing power for AI continues to far exceed supply for the time being.

AI cloud is growing explosively

Oracle saw revenue from its infrastructure division rise 84 percent to $4.9 billion in the quarter ended February 28. That is stronger than the 79 percent growth that analysts were expecting.

Oracle also remains optimistic for the longer term. The company expects total revenue to reach about $90 billion in the fiscal year starting in June. Analysts on average expected about $86.7 billion.

Oracle benefits from large cloud contracts with OpenAI and Meta, among others. The company builds data centers full of specialized chips that are used to train and run AI models.

According to Oracle, demand for AI computing power is currently growing faster than supply.

Huge investments in data centers

The rapid growth is accompanied by enormous investments. Last quarter, Oracle spent about $18.6 billion on capital expenditures, mostly on new data centers. Analysts had expected about $14 billion in advance.

For the current fiscal year, Oracle expects to invest a total of approximately $50 billion in infrastructure. This should help keep up with the growing demand for AI cloud capacity.

According to the company, approximately 90 percent of cloud capacity projects are now delivered on time or even ahead of schedule.

Giant AI contracts

Oracle also reported that its so-called remaining performance obligation, a measure of future contract revenues, increased to $553 billion. That was $523 billion in the previous quarter.

A large part of that growth is due to enormous AI contracts in which customers invest in the purchase of semiconductors for data centers. According to Oracle, the financial positions of major AI customers are also driving demand for cloud capacity.

AI is also changing software development

The rise of AI also has an impact on Oracle’s internal organization. New AI code generation tools allow the company to develop software faster with smaller teams.

Oracle previously announced that it would cut thousands of jobs to reduce costs. In total, the company expects to incur approximately $1.6 billion in restructuring costs in the fiscal year ending in May.

Strong figures despite earlier share price fall

In total, quarterly revenue increased by 22 percent to $17.2 billion. Profit came in at $1.79 per share, above analysts’ expectations.

Oracle shares reached a level of around $164 in after-hours trading, after closing at $149.40 earlier in the day.

Despite the strong figures, the share has been under pressure in recent months. Since a peak in September, Oracle has lost more than half of its value, mainly due to concerns about the high costs of the global AI data center buildout.