Oracle targets AI margin

Oracle has announced it anticipates a 35% gross margin for its AI cloud infrastructure projects, addressing concerns about profitability in this sector. This projection refers to AI workload infrastructure, such as data centres, generating $60 billion in revenue over six years. The company's clarification led to a stock increase of nearly 4%.

Oracle's management stated that previous reports of a 14% margin only reflected initial data centre costs before client activation, not the contract's full-term margin. While Oracle's AI cloud margin target is lower than competitors like CoreWeave, which boasts 51%, analysts believe this disclosure will reassure the market, especially given Oracle's expanding AI infrastructure customer base.

Looking ahead, Oracle has raised its 2030 revenue target for Oracle Cloud Infrastructure from $144 billion to $166 billion, expecting 75% annual growth from fiscal year 2025's $10 billion. The company's overall revenue target for 2030 is now $225 billion, up from the previous $104 billion forecast for 2029. Oracle anticipates annual revenue and earnings per share growth of around 30% over the next five years.