Oracle Lands Massive $300B OpenAI Cloud Deal, Stock Soars
Oracle has secured a massive cloud services deal with OpenAI, worth a staggering $300 billion over five years, starting in 2027. This monumental contract, one of the largest of its kind, comes as global AI spending is projected to reach $1.5 trillion in 2023.
Oracle's stock price has soared, boasting a forward PE ratio of 45 for fiscal 2026. The tech giant expects its cloud business's remaining performance obligations to surpass $500 billion by the end of the current quarter. Notably, $300 billion of this backlog is attributed to the OpenAI deal.
Oracle has positioned itself as a viable alternative to the big three cloud providers for AI companies seeking to diversify their compute providers. The company plans to invest $35 billion in its cloud business this year, with projected OCI revenue of $18 billion. OpenAI, for its part, has committed to spending $30 billion on Oracle's compute services, with spending ramping up from 2027 onwards.
With AI spending forecast to climb to $2 trillion by 2026, Oracle's ambitious plans to grow its AI compute business from $10 billion to $144 billion in annual sales over the next five years appear well-positioned. The OpenAI deal, one of the largest cloud contracts to date, underscores Oracle's increasing significance in the AI landscape.
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