Oracle’s mic drop moment: from cloud laggard to AI market darling

Key points:

• Oracle’s contracted backlog has surged to USD 455 billion, signalling a structural shift in demand.
• Management projects cloud infrastructure revenue to grow from USD 18 billion this year to USD 144 billion by 2030.
• Execution risks loom large, with capex ballooning to USD 35 billion and cash flow under pressure.

“Sometimes the headline numbers matter less than the story behind them — and this was a story about the future, not the past.”

Oracle stunned Wall Street on Tuesday. The database stalwart, long dismissed as a laggard in cloud computing, delivered a set of earnings that fell short on the usual metrics — yet its stock still leapt nearly 30% after hours. The reason? A tidal wave of new artificial intelligence business that has transformed its outlook almost overnight.

The catalyst: the number that bent the curve

The figure that bent the market’s expectations was USD 455 billion in remaining performance obligations (RPO) — essentially the backlog or future revenue already locked in. That’s up 359% from a year ago, powered by four multibillion-dollar contracts with customers ranging from OpenAI to Meta and Nvidia.

“When a company’s backlog quadruples in a year, it signals not just momentum, but a structural shift in demand.”

On the back of these deals, Oracle now expects cloud infrastructure revenue to surge from USD 18 billion this year to USD 144 billion by 2030. That is not incremental growth — it’s a new trajectory. For a company that was late to the cloud, this is a radical reinvention.

The quarter: good enough vs the backlog

On paper, the quarter itself was ordinary. Revenue rose 12% to USD 14.9 billion, narrowly missing forecasts. Earnings per share came in at USD 1.47, a cent below consensus. In most quarters, that would weigh on the stock. This time, the backlog told a different story — Oracle’s mic drop moment that silenced years of scepticism in a single quarter.

Competitive edge and why the demand landed at Oracle

The question for investors is why the world’s most demanding AI companies are turning to Oracle. The answer lies in speed and scarcity. Oracle builds gigawatt-scale data centres optimised for AI, with access to Nvidia GPUs and networks that move data faster than rivals.

Another underappreciated growth engine is Oracle’s multi-cloud database business. Revenue there surged more than 1,500% year on year, as Oracle databases became increasingly available inside AWS, Azure and Google Cloud. This positions Oracle not just as a competitor to the hyperscalers, but also as their enabler — embedding itself in rival ecosystems while riding the AI wave.

But the bigger prize is AI inference — the process of running models after they are trained. Larry Ellison argues this market could dwarf training. Oracle, sitting atop millions of enterprise databases, is uniquely positioned to monetise that demand.

Oracle’s place in the cloud league table

For all the excitement, Oracle’s cloud business remains small compared with Amazon and Microsoft. AWS generated more than USD 100 billion last year; Microsoft’s Azure about USD 75 billion. Oracle, at USD 18 billion, is still the challenger — but it now has contracts that could narrow the gap.

Risks and costs: the bill to be paid

The catch is cost. Oracle now plans USD 35 billion in capital spending this year, far more than initially projected. Free cash flow has already turned negative as money pours into servers and data centres. Oracle is effectively sprinting to keep up with demand — and sprints, however exhilarating, can leave companies breathless.

Forward catalysts and what to watch next

For investors, the key now is less about the past quarter and more about how Oracle executes from here. Four things stand out:

• Contract conversion — how quickly backlog turns into revenue.
• Capex discipline — whether margins hold as spending accelerates.
• AI partnerships — OpenAI and Nvidia remain vital proof points.
• AI inference rollout — the new AI Database could be Oracle’s ace card.

The lesson of this story is twofold. First, incumbents can pivot faster than many expect when a technology wave reshapes the market. Second, Wall Street will often forgive a miss on earnings when the long-term story is compelling enough.

From database stalwart to AI utility

For decades, Oracle was the dependable but unglamorous provider of database software. Now, with AI contracts flooding in, it is being recast as a critical utility in the global AI build-out. The path forward will be bumpy — capex-heavy, fiercely competitive, and dependent on execution. But for now, Oracle has captured the market’s imagination.