The $110 Billion Catalyst That Makes It More Likely Oracle Will Hit Its 700% Cloud Infrastructure Revenue Growth Guidance by 2030
In September last year, Seer‘s (NYSE:ORCL) Based on the first quarter earnings results of fiscal 2026, management issued striking guidance for the cloud infrastructure division. This segment includes the company’s data center business, which primarily leases graphics processing units (GPUs) to companies using artificial intelligence solutions.
At the time, Oracle said cloud infrastructure revenue would grow 77% to $18 billion in the current fiscal year, followed by $144 billion in fiscal 2030. Investors liked it and sent the stock on a torrid rally.
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The rally will be short-lived as AI concerns will affect the entire symbiotic ecosystem. But now, a recent $110 billion catalyst could make Oracle’s fiscal 2030 guidance more likely.
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After a strong September quarter, investors quickly realized that the devil was in the details. At the time, Oracle reported $455 billion in remaining performance obligations (RPOs), representing revenue under contract but not yet collected. The high number of RPOs gave the company and investors confidence in Oracle’s guidance.
But it eventually turned out that $300 billion of those RPOs came from ChatGPT’s parent company, OpenAI, which had a five-year deal with Oracle. data center capacity. OpenAI has a number of outstanding data center commitments that will total $1.4 trillion over the next eight years.
This has investors worried because despite being the fastest-growing consumer app ever, the company still only generates around $20 billion in annual revenue. Meanwhile, Oracle was raising significant debt to complete its data center build-out, posing a significant risk if OpenAI failed to meet its commitments.
Company boosts full-year profit in fiscal 2026 second-quarter earnings report capital expenditure raised guidance to $50 billion from $35 billion and reported negative free cash flow; This did little to assuage investors’ concerns that they might be taking on too much risk.
The good news for Oracle is that OpenAI recently completed a successful $110 billion private financing round led by investors. Amazon, Nvidiaand SoftBank assigned the company a preliminary valuation of $730 billion. Although there were rumors about this increase, no one was sure that it would be made.
Additionally, this will give the company a solid path to raise additional capital before pursuing an IPO. OpenAI also plans to advertise on ChatGPT. Evercore ISI analyst Mark Mahaney previously wrote in a research note that this business could grow to $25 billion annually if OpenAI becomes a reality.
Mahaney based his assumptions on ChatGPT’s projected scale by 2030 and how other marketing platforms have historically generated revenue from ads. A report in late February by CNBC, citing anonymous sources, said OpenAI believes it could boost total company revenue to $280 billion annually by 2030.
So, given its recent capital raising and revenue estimates, you’re starting to see how OpenAI could potentially fund its entire AI infrastructure commitments, but I’m sure those estimates vary depending on who you ask.
In the third quarter, Oracle announced RPOs of $553 billion, beating Wall Street forecasts and giving investors greater confidence that there is strong demand for data centers and that the company’s capex will translate into good long-term investments.
These results, along with increased confidence that OpenAI can deliver on all its commitments, sent shares higher. In fact, Wall Street analysts predict the company will generate $158 billion in cloud infrastructure revenue in fiscal 2030, according to data from Visible Alpha. The forecast is now based on models from just four analysts. While there is much more to come involving Oracle, this isn’t a bad start.
Additionally, if Oracle grows cloud infrastructure revenue at the same rate this quarter as it did in the third quarter, the company’s revenue would exceed $18 billion and meet management’s guidance.
Following the stock’s decline over the last six months, I think investors may at least start nibbling at Oracle, given that its risk-reward structure has become much more favorable.
Before buying shares in Oracle, consider:
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Bram Berkowitz It has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia and Oracle. The Motley Fool has a feature disclosure policy.
