Oracle's AI Boom vs Stock Struggle | Raleigh News

0:00Oracle's been a tech giant for ages, but lately their cloud infrastructure, OCI, is really driving growth, especially with this AI boom. They just dropped a solid quarter with cloud infrastructure revenue jumping 121% year over year. Total revenue hit 19.3 billion dollars, a 30% increase, and get this. They booked over 30 billion dollars in new AI cloud contracts in just one quarter. Their total backlog, called remaining performance obligations, is now a massive $664 billion. Despite all that impressive growth, the stock price hasn't been reflecting it, actually down significantly year to date, and over the past year. Analysts have Morgan Stanley are looking at this disconnect. Noting that while OCI is delivering, the path to higher profit margins is still the big. Question mark. They've kept their rating at equal weight, meaning they're not strongly recommending buying or selling, because they want to see more concrete proof of profitability.

1:01The company itself is pushing hard, adding a ton of data center capacity, and deploying hundreds of thousands of GPUs to meet the demand for AI services. Customer demand is outstripping their current supply, which is a good problem to have, but it requires massive investment. They've also guided for continued strong revenue growth in the next quarter and for the full year. Morgan Stanley did highlight some positives, like how Oracle is diversifying its data center locations and getting better pricing on renewed GPU. Contracts. Showing some pricing power. They also completed a large equity program, which removed a potential drag on the stock. However, the core concern remains, when will all this investment in building out capacity actually translate into more impressive profits flowing down? To the bottom line. The big picture for investors is this, if you believe Oracle's massive investments will pay off down the line, as that huge backlog converts to. Revenue.

2:01The stock might look attractive. But if you're worried about the economics of providing these AI services, the pressure on profit margins is a valid concern. All eyes are now on Oracle's upcoming financial analyst day, where they're expected to lay out more details on their infrastructure plans, profit, margins, and how they'll turn that backlog into actual earnings. That's one will likely get a clearer picture of where the stock is headed. That's your Raleigh News Today update AI powered and always on.