Oracle’s Earnings Insights
Oracle (NYSE: ORCL) reported a substantial increase in its remaining performance obligations (RPO), which reached $523 billion at the end of the most recent quarter, largely driven by a $300 billion cloud infrastructure deal with OpenAI. The company has over 700 AI customers, with OpenAI being a major contributor to this backlog, necessitating significant expansion of its AI data centers.
During its second-quarter earnings call, Oracle co-CEO Clay Magouyrk highlighted the company’s adaptability in managing customer concentration risk, stating that it can shift AI computing capacity between customers within hours if needed. However, analysts caution that this strategy won’t be effective if the industry faces an oversupply of AI infrastructure in the coming years, as overbuilding by tech giants may lead to reduced demand and financial strain on firms like Oracle.
Despite current demand for AI infrastructure, concerns about future overcapacity could pose significant risks, especially given Oracle’s reliance on customer payments, particularly from OpenAI. Goldman Sachs warns data center occupancy rates may peak in late 2026, emphasizing the uncertainty surrounding the future of the AI market.
