Oracle Stuns with Rapid AI Expansion and Massive Contracts

Microsoft and Oracle are two legacy tech giants competing in the AI cloud market. However, while Microsoft had an initial advantage, Oracle has been rapidly expanding its AI infrastructure business and emerging as a surprise underdog.

Microsoft's Azure platform already had significant scale when the AI boom began. The company's partnership with OpenAI gave it a strategic advantage in the early days of the race. But Oracle is quickly catching up. In its most recent fourth quarter, Oracle's cloud infrastructure revenue grew 93% year-over-year to $19.2 billion, while total revenue increased 21%. Cloud database revenue jumped 29%, showing AI opportunity is not just about selling raw computing capacity.

One of the key metrics that investors may have overlooked was the massive remaining performance obligations (RPO), which increased by a whopping 363% year-over-year to $638 billion. This figure represents actual revenue that will be recognized over the coming months, backed by long-term contractual customer commitments across AI infrastructure and cloud services.

Oracle has signed $67 billion worth of AI infrastructure contracts in Q4 alone, bringing its combined bring-your-own-hardware and prepaid customer contracts to $75 billion. The company is also making enterprise AI easier to buy through token-based and outcome-based pricing, while its applications business provides a built-in channel for AI adoption.