Oracle boasts $455B backlog from AI boom, but not all its new friends will live to pay up
(2025/09/10)
- Reference: 1757510409
- News link: https://www.theregister.co.uk/2025/09/10/oracle_cloud_llm_cash/
- Source link:
Comment An industry adage has it that [1]Oracle's calculator only has a plus button , which is reassuring for investors.
Yesterday, they were effusive with praise for Big Red over projected revenues as its [2]share price soared more than 27 percent , and CTO and co-founder Larry Ellison was positioned to overtake Elon Musk as the world's richest person. But something doesn't add up.
The analyst excitement – "this is a career event happening right now, it's just amazing," one said – is based on anticipated future earnings from remaining performance obligations (RPOs) in the first quarter of its 2026 fiscal year. These are contracts signed but not yet paid for. Oracle said the figure had risen to $455 billion.
[3]
"This is up 359 percent from last year and up $317 billion from the end of Q4 [2025]," said Safra Catz, Oracle CEO.
[4]
[5]
"The enormity of this RPO growth enables us to make a large upward revision to the cloud infrastructure portion of our financial plan," Catz said, before predicting Oracle's cloud infrastructure business would grow 77 percent to $18 billion this fiscal year and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the following four years.
Where is the money coming from? Catz continued: "We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, Nvidia, AMD, and many others."
[6]
Such a customer base is in stark contrast to the bedrock of Oracle's global empire, which grew first from dominance of the database market, and then, through an [7]aggressive acquisition spree , to rival SAP in enterprise applications.
Oracle has diverged from this path, though, as its latest numbers show. Its cloud infrastructure business has grown by 55 percent over the last year, compared with 11 percent growth in cloud applications, which largely rely on converting on-prem customers to the Oracle cloud. In the first quarter of 2025, cloud infrastructure revenue was 62 percent of its cloud application equivalent. In Q1 2026, it was 87 percent.
Ellison said on an investor call: "AI is fundamentally transforming Oracle and the rest of the computer industry, though not everyone fully grasps the extent of the tsunami that is approaching. Look at our quarterly numbers. Some things are undeniably evident. Several world-class AI companies have chosen Oracle to build large-scale GPU-centric datacenters to train their AI models."
[8]
He then predicted that AI inference – inferring how to respond to new data or questions – would become a much bigger market than AI training, before launching into a starry-eyed vision of the future.
"AI inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, interpreting medical diagnostic images and laboratory results, automating laboratories, placing bets in financial markets, automating legal processes, automating financial processes, automating sales processes. AI is going to generate the computer programs called AI agents that will automate your sales and marketing processes. Let me repeat that. AI is going to automatically write the computer programs that will then automate your sales processes and your legal processes and everything else and in your factories and so on. Think about it."
OK, Larry, we will. If we have to. But also consider this: if the demand for Oracle's cloud infrastructure is coming from AI model builders, where is their money coming from?
OpenAI, the highest profile among them, seems happy to continue running at a loss for the foreseeable future, and is projected to burn through $8 billion in cash in 2025, as [9]reports suggest it is [10]tapping up investors for the second $30 billion portion of its current funding round.
While Oracle might be assured of the billions of dollars stuffing its fiscal pipeline from RPOs, it is not certain whether this will continue for the next four years.
In March, John-David Lovelock, Distinguished VP Analyst at Gartner, [11]told The Register that the race was on among AI vendors in terms of speed, adoption, and being in the market, but "there is extinction coming."
"The market will not be able to support this number of model providers that we currently have. From the capital expenditure requirements through to revenue, the cloud market only bears three [players] and you can expect the same with GenAI model developers," he said.
[12]Mega-and-MAGA deals position Oracle's Larry Ellison to overtake Elon
[13]Oracle's layoff train rolls on: 101 in WA, 250+ in CA – with more cuts looming
[14]Oracle cuts cloud jobs with Seattle hit hard as AI spending soars
[15]Oracle VirtualBox licensing tweak lies in wait for the unwary
There will be a more gradual "pruning" of AI developers than the dramatic bubble burst of the dotcom era, Lovelock added. Note that he only sees three significant players in the cloud market, and Oracle is not one of them.
Despite Ellison's dream of automating our workplace tasks, there's evidence raising questions over AI's usefulness in business. A recent UK government trial of Microsoft's M365 Copilot [16]revealed no discernible gain in productivity. A study from Salesforce found [17]LLM-based AI agents perform below par on standard CRM tests and fail to understand the importance of customer confidentiality. Mainstream media is also [18]casting doubt over the supposed omnipotence of LLMs .
It's not just GenAI model builders spending big with Oracle, though. One analyst [19]speaking to CNBC pointed out that the big hyperscalers like Microsoft and Google are "offloading their capacity to other datacenter providers," including Oracle.
DA Davidson analyst Gil Luria said: "These are not organic customers to Oracle. This is Microsoft, Google, and Amazon's customers that will use Oracle capacity."
Eventually, these cloud vendors' own capacity will catch up with demand. And before long, the extinction will strike the LLM providers. Only then will Oracle's backers know if they've made the right calculation. ®
Get our [20]Tech Resources
[1] https://www.theregister.com/2022/02/15/oracle_briefs_against_migrations_claim/
[2] https://www.theregister.com/2025/09/10/oracle_q1_results/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2025/01/02/twenty_years_since_oracle_bought_peoplesoft/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.cnbc.com/2025/08/08/chatgpt-gpt-5-openai-altman-loss.html#:~:text=OpenAI%20CEO%20Sam%20Altman%20on,on%20$3.7%20billion%20in%20revenue
[10] https://www.reuters.com/business/openai-hits-12-billion-annualized-revenue-information-reports-2025-07-31/
[11] https://www.theregister.com/2025/03/31/llm_providers_extinction/
[12] https://www.theregister.com/2025/09/10/oracle_q1_results/
[13] https://www.theregister.com/2025/09/03/oracle_cuts_more_jobs/
[14] https://www.theregister.com/2025/08/15/oracle_cuts_300_in_california/
[15] https://www.theregister.com/2025/07/30/licensing_change_oracle_virtualbox/
[16] https://www.theregister.com/2025/09/04/m365_copilot_uk_government/
[17] https://www.theregister.com/2025/06/16/salesforce_llm_agents_benchmark/
[18] https://www.economist.com/business/2025/09/08/faith-in-god-like-large-language-models-is-waning
[19] https://www.cnbc.com/2025/09/09/were-all-kind-of-in-shock-oracle-projections-analysts-slackjawed.html
[20] https://whitepapers.theregister.com/
Yesterday, they were effusive with praise for Big Red over projected revenues as its [2]share price soared more than 27 percent , and CTO and co-founder Larry Ellison was positioned to overtake Elon Musk as the world's richest person. But something doesn't add up.
The analyst excitement – "this is a career event happening right now, it's just amazing," one said – is based on anticipated future earnings from remaining performance obligations (RPOs) in the first quarter of its 2026 fiscal year. These are contracts signed but not yet paid for. Oracle said the figure had risen to $455 billion.
[3]
"This is up 359 percent from last year and up $317 billion from the end of Q4 [2025]," said Safra Catz, Oracle CEO.
[4]
[5]
"The enormity of this RPO growth enables us to make a large upward revision to the cloud infrastructure portion of our financial plan," Catz said, before predicting Oracle's cloud infrastructure business would grow 77 percent to $18 billion this fiscal year and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the following four years.
Where is the money coming from? Catz continued: "We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, Nvidia, AMD, and many others."
[6]
Such a customer base is in stark contrast to the bedrock of Oracle's global empire, which grew first from dominance of the database market, and then, through an [7]aggressive acquisition spree , to rival SAP in enterprise applications.
Oracle has diverged from this path, though, as its latest numbers show. Its cloud infrastructure business has grown by 55 percent over the last year, compared with 11 percent growth in cloud applications, which largely rely on converting on-prem customers to the Oracle cloud. In the first quarter of 2025, cloud infrastructure revenue was 62 percent of its cloud application equivalent. In Q1 2026, it was 87 percent.
Ellison said on an investor call: "AI is fundamentally transforming Oracle and the rest of the computer industry, though not everyone fully grasps the extent of the tsunami that is approaching. Look at our quarterly numbers. Some things are undeniably evident. Several world-class AI companies have chosen Oracle to build large-scale GPU-centric datacenters to train their AI models."
[8]
He then predicted that AI inference – inferring how to respond to new data or questions – would become a much bigger market than AI training, before launching into a starry-eyed vision of the future.
"AI inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, interpreting medical diagnostic images and laboratory results, automating laboratories, placing bets in financial markets, automating legal processes, automating financial processes, automating sales processes. AI is going to generate the computer programs called AI agents that will automate your sales and marketing processes. Let me repeat that. AI is going to automatically write the computer programs that will then automate your sales processes and your legal processes and everything else and in your factories and so on. Think about it."
OK, Larry, we will. If we have to. But also consider this: if the demand for Oracle's cloud infrastructure is coming from AI model builders, where is their money coming from?
OpenAI, the highest profile among them, seems happy to continue running at a loss for the foreseeable future, and is projected to burn through $8 billion in cash in 2025, as [9]reports suggest it is [10]tapping up investors for the second $30 billion portion of its current funding round.
While Oracle might be assured of the billions of dollars stuffing its fiscal pipeline from RPOs, it is not certain whether this will continue for the next four years.
In March, John-David Lovelock, Distinguished VP Analyst at Gartner, [11]told The Register that the race was on among AI vendors in terms of speed, adoption, and being in the market, but "there is extinction coming."
"The market will not be able to support this number of model providers that we currently have. From the capital expenditure requirements through to revenue, the cloud market only bears three [players] and you can expect the same with GenAI model developers," he said.
[12]Mega-and-MAGA deals position Oracle's Larry Ellison to overtake Elon
[13]Oracle's layoff train rolls on: 101 in WA, 250+ in CA – with more cuts looming
[14]Oracle cuts cloud jobs with Seattle hit hard as AI spending soars
[15]Oracle VirtualBox licensing tweak lies in wait for the unwary
There will be a more gradual "pruning" of AI developers than the dramatic bubble burst of the dotcom era, Lovelock added. Note that he only sees three significant players in the cloud market, and Oracle is not one of them.
Despite Ellison's dream of automating our workplace tasks, there's evidence raising questions over AI's usefulness in business. A recent UK government trial of Microsoft's M365 Copilot [16]revealed no discernible gain in productivity. A study from Salesforce found [17]LLM-based AI agents perform below par on standard CRM tests and fail to understand the importance of customer confidentiality. Mainstream media is also [18]casting doubt over the supposed omnipotence of LLMs .
It's not just GenAI model builders spending big with Oracle, though. One analyst [19]speaking to CNBC pointed out that the big hyperscalers like Microsoft and Google are "offloading their capacity to other datacenter providers," including Oracle.
DA Davidson analyst Gil Luria said: "These are not organic customers to Oracle. This is Microsoft, Google, and Amazon's customers that will use Oracle capacity."
Eventually, these cloud vendors' own capacity will catch up with demand. And before long, the extinction will strike the LLM providers. Only then will Oracle's backers know if they've made the right calculation. ®
Get our [20]Tech Resources
[1] https://www.theregister.com/2022/02/15/oracle_briefs_against_migrations_claim/
[2] https://www.theregister.com/2025/09/10/oracle_q1_results/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2025/01/02/twenty_years_since_oracle_bought_peoplesoft/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aMGglt1TEqysJS9x_esSnQAAAJI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.cnbc.com/2025/08/08/chatgpt-gpt-5-openai-altman-loss.html#:~:text=OpenAI%20CEO%20Sam%20Altman%20on,on%20$3.7%20billion%20in%20revenue
[10] https://www.reuters.com/business/openai-hits-12-billion-annualized-revenue-information-reports-2025-07-31/
[11] https://www.theregister.com/2025/03/31/llm_providers_extinction/
[12] https://www.theregister.com/2025/09/10/oracle_q1_results/
[13] https://www.theregister.com/2025/09/03/oracle_cuts_more_jobs/
[14] https://www.theregister.com/2025/08/15/oracle_cuts_300_in_california/
[15] https://www.theregister.com/2025/07/30/licensing_change_oracle_virtualbox/
[16] https://www.theregister.com/2025/09/04/m365_copilot_uk_government/
[17] https://www.theregister.com/2025/06/16/salesforce_llm_agents_benchmark/
[18] https://www.economist.com/business/2025/09/08/faith-in-god-like-large-language-models-is-waning
[19] https://www.cnbc.com/2025/09/09/were-all-kind-of-in-shock-oracle-projections-analysts-slackjawed.html
[20] https://whitepapers.theregister.com/
Autonomy(-ous) System?
StewartWhite
Anybody else detect the strong whiff of Autonomy style "creative" accounting here?
What's the betting that Larry demanded that the numbers came in high enough such that he would be declared the world's biggest tool richest man? Him and his company are so unhinged from reality that it wouldn't surprise me if he has realised he's about to peg it and so any financial engineering scandal that comes out will be well after he's dead and buried (and there's a queue to dance on his grave).
he'll be able to "shit on the carpet and have a robot clean it up"