Oracle's AI upside is bigger than the market thinks

Nvidia makes the headlines. Microsoft makes the headlines. But one company quietly signed $68 billion in new AI deals last quarter.

Oracle (ORCL) reports fiscal Q3 earnings after the close on March 9. The database giant now runs the infrastructure that keeps AI models from Nvidia and workloads from Microsoft humming.

Last quarter, in numbers

• Total revenue: $16.1 billion (up 14%)

• Cloud revenue: $8 billion (up 34%)

• GPU-related revenue: up 177%

The backlog tells a bigger story

Remaining performance obligations hit $523 billion. That is $68 billion in new contracts signed in a single quarter. This is not pipeline – this is booked demand.

How Oracle carved out its space

• The strategy: Most cloud providers lock customers into their ecosystem. Oracle lets its database run inside AWS, Microsoft, and Google data centers. Companies can keep using Oracle while running everything else on another cloud. That approach drove multi-cloud consumption up 817%.

• The trade-off: Oracle spent $12 billion building data centers last quarter and posted negative free cash flow. Standard playbook: spend now, capture market share later.

Three things to watch in Q3

1. Can IaaS hold above 50% growth? Last quarter, Oracle's cloud infrastructure revenue jumped 68%. The market wants to see if AI compute demand is still running hot.

2. Will investors stay patient with $50 billion in CapEx? Oracle spent $12 billion on data centers last quarter and posted negative free cash flow. Management raised the full-year target to $50 billion. The question is how long investors wait for returns.

3. When does the backlog convert? Remaining performance obligations hit $523 billion, with $68 billion added last quarter alone. The market is watching how fast that turns into revenue.

Two core reasons to be bullish

1. Structural position: Oracle sits between the chip layer and the application layer. Nvidia needs data centers to put its chips in. Microsoft needs infrastructure to run its workloads on. Oracle provides the floor space and the pipes connecting them.

2. The database moat: Oracle's core database business still powers the world's largest enterprises. Those customers are moving to the cloud, and they are bringing Oracle with them. Every AI model needs compute power, storage, and infrastructure. Oracle sells all three.

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Disclaimer: For informational purposes only. Not investment advice. Always do your own research.