Oracle has forecast that surging demand for artificial intelligence infrastructure will drive its revenue well beyond Wall Street expectations through 2027, sending the company’s shares sharply higher in extended trading.
The technology company said its expanding network of AI-focused data centers is expected to fuel long-term growth as businesses increasingly require powerful computing capacity to support generative AI workloads.
Following the announcement, Oracle shares jumped 8.3 percent after the market closed, reflecting investor confidence that the company’s expensive push into artificial intelligence infrastructure could deliver substantial financial returns.
The update also eased concerns among some investors who had questioned whether Oracle’s multi-billion dollar spending on AI computing facilities would translate into profits quickly enough.
A key indicator of the company’s future revenue, known as remaining performance obligations, surged dramatically during the quarter as large contracts tied to AI infrastructure continued to accumulate.
Oracle reported that remaining performance obligations reached $553 billion in the third quarter, representing a 325 percent increase compared with the same period last year.
That figure exceeded the $540.37 billion estimate compiled by Visible Alpha analysts and also marked a significant increase from the $523 billion reported in the previous quarter.
According to the company, much of the growth in contracted revenue is connected to large-scale artificial intelligence deals that will unfold over several years as clients expand their computing capacity.
Oracle also said the projects tied to these agreements are not expected to require additional capital raising despite the company having already taken on significant borrowing to finance its infrastructure expansion.
Data Center Strategy Targets AI Infrastructure Demand
The company’s strategy focuses on building large data centers capable of handling the immense computing requirements needed to train and operate modern artificial intelligence systems.
Oracle is pursuing partnerships with major technology companies, including organizations developing advanced AI models, as it competes for customers against cloud computing giants offering similar services.
The company has been expanding its cloud infrastructure rapidly in order to secure a larger share of the booming artificial intelligence market, which has become one of the fastest-growing sectors in the technology industry.
Executives believe the investment will position Oracle as a major infrastructure provider for AI development as demand for specialized computing hardware continues to accelerate worldwide.
As part of its updated outlook, Oracle raised its fiscal 2027 revenue forecast to $90 billion, significantly higher than the $86.6 billion expected by analysts tracking the company’s performance.
Industry observers say the results provide an important test for the broader artificial intelligence investment trend, particularly because Oracle has taken on more debt than many competitors while pursuing its expansion.
“Oracle’s quarter is a beat and a stress test result for the AI trade,” said eMarketer analyst Jacob Bourne.
“As the most debt-exposed major player in AI infrastructure, Oracle is the canary in the coal mine and this report suggests there’s underlying health in AI spending beyond the hype.”
Executives Expect Cloud Margins To Improve Over Time
During a conference call with investors, Oracle executives emphasized that the company’s cloud computing margins should strengthen as usage of its infrastructure continues to increase.
Clay Magouyrk, one of Oracle’s two chief executives, said renting out AI chips supplied by hardware partners such as Nvidia should generate margins ranging between 30 percent and 40 percent.
He also explained that roughly ten to twenty percent of customer spending within Oracle’s cloud division will involve additional services including its longstanding database technology products.
Those database services typically deliver much higher profitability, with gross margins estimated between 60 percent and 80 percent depending on the product and deployment environment.
“When you combine all of these pieces together, the overall margin profile of (Oracle Cloud Infrastructure) continues to strengthen and grows rapidly,” Magouyrk said.
Oracle’s leadership also addressed growing industry debate about whether AI-powered coding tools might eventually reduce demand for traditional Business software products.
Company co-founder and executive chairman Larry Ellison dismissed those concerns, arguing that Oracle is embracing the same AI coding technologies to accelerate development of new software platforms.
Ellison said the company is using smaller engineering teams supported by advanced coding tools to rapidly develop agent-based software products designed to automate complex industries such as healthcare and financial services.
“Thank God we have these coding tools now that allow us to build a comprehensive set of software — agent-based software to automate a complete ecosystem like healthcare, or financial services,” Ellison said.
“That’s why we think the ‘SaaS’-apocalypse applies to others but not to Oracle.”