Oracle disclosed the gross margin expectations for its large-scale artificial intelligence infrastructure projects, alleviating some of Wall Street’s concerns about the profitability of this crucial new business unit.
According to Zhitong Finance APP, $Oracle (ORCL.US)$The disclosure of gross margin expectations for large-scale artificial intelligence infrastructure projects alleviated some of Wall Street’s concerns about the profitability of this crucial new business unit.
During an investor presentation at Oracle’s annual conference in Las Vegas on Thursday, the company stated that for artificial intelligence workloads infrastructure projects, such as data centers, a project generating $600 billion in total revenue over six years would achieve a gross margin of 35%. Gross margin refers to the percentage of revenue remaining after deducting the cost of producing goods and services.
Co-CEO Clay Magouyrk told analysts that the gross margin level in this example is “indicative even for the largest customers.”
Following the announcement, Oracle’s shares rose nearly 6% at one point and closed up 3.1% at $313. However, after the company released its long-term revenue and profit forecasts later on Thursday, its stock fell approximately 2% in after-hours trading.
Oracle has signed several major agreements to develop artificial intelligence data centers for clients such as OpenAI, Meta (META.US), and Elon Musk’s xAI. While these orders have driven up the company’s valuation, investors have expressed concerns about the profitability of the related businesses.
Analyst Anurag Rana noted that the newly disclosed information “helps ease market concerns about declining profitability.” According to reports last week, the gross margin for some of Oracle’s artificial intelligence cloud business collaborations was only 14%. Rana wrote: “Given that this business is still in its infancy, profitability is highly likely to improve in the coming years.”
Oracle also stated that it expects annual revenue in fiscal year 2030 to reach $225 billion, surpassing the analysts’ average estimate of $198 billion. The company forecasts adjusted earnings per share to reach $21 by fiscal year 2030, again exceeding the analysts’ average estimate of $18.50.
Last month, Oracle disclosed that of its $225 billion in revenue for the fiscal year 2030, $144 billion would come from sales of cloud infrastructure services.
Editor /rice
