On March 10, 2025, Oracle released its third quarter financial report for fiscal year 2025. Despite impressive growth in its cloud business, revenue and earnings guidance were lower than market expectations, causing the stock price to experience sharp fluctuations after the market. However, the market's focus has shifted from short-term performance to a grander narrative - can the "Stargate" project in cooperation with OpenAI become the key engine to drive Oracle's stock price up?
Financial report performance: cloud business is strong, but short-term pressure is evident
Revenue and profit growth slowed down
In the third quarter, Oracle's total revenue was US$14.1 billion, a year-on-year increase of 6%, lower than the market expectation of US$14.4 billion; adjusted earnings per share were US$1.47, slightly lower than the expected US$1.49. Although cloud infrastructure (IaaS) revenue increased 49% year-on-year to US$2.7 billion, the overall cloud revenue growth rate (23%) did not meet analysts' expectations.
Future guidance is conservative
The company expects revenue growth of 8%-10% in the next quarter, lower than Wall Street's expectation of 11%. However, management is confident in long-term growth, expecting revenue growth of 15% in fiscal 2026 (higher than the market expectation of 13%), and the growth rate will increase to 20% in fiscal 2027.
Orders and performance obligations surge
The highlight of the financial report is that the remaining performance obligations (RPO) increased by 62% year-on-year to US$130 billion, reflecting the increased certainty of future revenue. This quarter, a new cloud service contract of US$48 billion (excluding the Stargate project) was signed, and customer demand continued to be strong.
Stargate: AI-driven "moon landing plan"
Project background and potential value
Stargate is a US$500 billion AI infrastructure project jointly initiated by OpenAI, Oracle and SoftBank, which plans to build a data center network covering the entire United States. As a core infrastructure supplier, Oracle is expected to obtain huge orders by providing GPU clusters and liquid cooling technology. Although no formal contract has been signed yet, Chairman Larry Ellison revealed that "the first large contract is about to be finalized."
Market expectations and risks
If the project is implemented, Stargate may bring Oracle an annual revenue increase of more than US$10 billion (current annual revenue is about US$53 billion) and consolidate its position in the AI computing market. However, the project relies on large-scale capital expenditures (estimated at $16 billion in fiscal 2025) and faces competitive pressure from Microsoft and AWS. In addition, it remains uncertain whether OpenAI will reduce its dependence on Microsoft.
Cloud and AI: Dual engines of growth
Infrastructure expansion and technological advantages
Oracle is accelerating data center construction, planning to double capacity to three times by 2027 and deploy 64,000 NVIDIA GB200 GPU clusters. Its liquid cooling technology and automated architecture can reduce operating costs, improve reliability, and attract customers such as Meta and xAI.
Multi-cloud strategy and database moat
By embedding Oracle databases into platforms such as AWS and Azure, Oracle has achieved a 92% increase in cross-cloud service revenue. Its "AI-integrated database" strategy (such as 23ai) further strengthens the integration of data and AI workflows.
Market concerns: gap and cash flow pressure
Despite rapid growth, Oracle is still a "chaser" in the cloud market:
Market share gap: IaaS revenue of $2.7 billion is only 9% of AWS ($28.8 billion).
Capital expenditure pressure: Free cash flow fell 70% year-on-year, and $16 billion in annual capital expenditures may lead to short-term financial pressure.
AI demand fluctuations: If the generative AI boom cools down, high-investment data centers may face utilization risks.
Stock price outlook: short-term volatility, long-term view of "Stargate"
The current fluctuations in Oracle's stock price reflect the market's disagreement on short-term performance and long-term potential:
Short-term catalysts: Stargate contract signing, GPU supply capacity verification, and AI reasoning demand explosion.
Long-term logic: If the Stargate project goes smoothly, Oracle is expected to leap from the "Others" camp to the first echelon of AI cloud services, supporting an annual compound growth rate of more than 20%.
Conclusion: Oracle is at a critical node in its transformation from a traditional software giant to an AI cloud service provider. Although short-term financial report fluctuations may suppress stock price performance, the potential explosive power of the Stargate project provides it with a unique narrative space. Investors need to pay close attention to the progress of contract implementation and capital expenditure efficiency, which may become a watershed in determining whether its stock price can "take off".
*Disclaimer: The content of this article is for learning purposes only and does not represent the official position of VSTAR, nor can it be used as investment advice.
