TLDR
- Guggenheim analyst John DiFucci maintains Oracle is a “decade stock” despite shares falling 9% in the past month over concerns about heavy spending and customer concentration risks.
- Oracle has secured major AI contracts including one with OpenAI worth $300 billion, featuring non-cancelable terms that lock in GPUs and power at signing.
- The company projects its AI data platform could reach $20 billion in revenue by fiscal year 2030, growing roughly 50% annually for five years.
- Oracle hasn’t finalized financing plans for its massive AI expansion, with CFO Doug Kehring noting spending is 12 to 18 months away and could involve debt, vendor financing, or equity.
- OpenAI is diversifying its cloud strategy with $250 billion allocated to Microsoft, $300 billion to Oracle, and $38 billion to AWS, showing major AI companies are securing compute resources through long-term commitments.
Oracle shares have dropped 9% over the past month. Investors are concerned about the company’s heavy spending plans and reliance on major customers like OpenAI.
But Guggenheim analyst John DiFucci remains bullish. He calls Oracle a “decade stock” driven by what he sees as a massive opportunity in AI training and inferencing.
The stock is still up 75% over the past six months. Year-to-date gains stand at 57%.
DiFucci points to Oracle’s technology advantages over hyperscaler competitors. The company’s clustering technology for AI training workloads gives it an edge in the market.
Oracle has started sharing detailed five-year targets for revenue, earnings per share, and margins. CFO Doug Kehring recently outlined the financial mechanics behind the company’s AI infrastructure push at investor meetings.
The company has landed major contracts, including one with OpenAI. That deal is reportedly worth $300 billion as part of OpenAI’s broader cloud diversification strategy.
Contract Details and Financing Questions
Oracle’s new AI contracts come with three key features. They’re non-cancelable, not tied to milestones or scale-backs, and lock in GPUs, power, and data center access at signing.
DiFucci notes these deals are “committed to at signing.” This structure reduces uncertainty compared to traditional cloud contracts.
But Oracle hasn’t locked in how it will finance the expansion. Kehring said much of the spending is 12 to 18 months away.
The company is considering options including debt, vendor financing, or equity. This timing uncertainty raises questions about when cash outflows will hit and how they might affect margins.
The heavy reliance on OpenAI introduces concentration risk. If OpenAI’s business falters or the relationship changes, Oracle could face challenges.
Revenue Projections and Growth Targets
Oracle projects its AI data platform could reach around $20 billion in revenue by fiscal year 2030. That represents roughly 50% annual growth over the next five years.
The company’s long-term EPS forecast through FY2030 shows growth of about 28% annually. DiFucci notes this already factors in financing costs.
If Oracle delivers on these projections, the higher-margin AI business could meaningfully boost earnings. But investors should expect heavy spending to slow margin expansion in the near term.
Returns from major AI training deals may take time to materialize. The build-out could exceed $500 billion in future obligations.
OpenAI’s recent moves show how AI companies are securing compute resources. The company ended its exclusive partnership with Microsoft and is now spreading its bets.
OpenAI has allocated $250 billion to Microsoft, $300 billion to Oracle, and $38 billion to AWS. The AWS deal provides access to hundreds of thousands of NVIDIA GPUs, including new GB200s and GB300s.
OpenAI co-founder and CEO Sam Altman said “scaling frontier AI requires massive, reliable compute.” The full capacity from the AWS deal won’t be deployed until the end of 2026, with options to expand into 2027.
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