Oracle expects AI infrastructure gross margins to reach 35%, alleviating Wall Street's profitability concerns, with its stock price rising as much as 5%.

Oracle expects AI infrastructure gross margins to reach 35%, alleviating Wall Street's profitability concerns, with its stock price rising as much as 5%.

Oracle Corporation has disclosed its profit margin expectations for large-scale AI infrastructure projects for the first time, alleviating investor concerns about the profitability of this crucial new business. On October 16, Oracle discussed the profit prospects of its AI infrastructure business with concrete examples at its annual investor conference in Las Vegas. For a six-year AI infrastructure project with total revenue of $60 billion, the gross margin can reach 35%. Previously, although Oracle had signed numerous AI data center development agreements with clients such as OpenAI, Meta, and Elon Musk's xAI, boosting the company's valuation, Wall Street had continued to question the profitability of such business. As referenced last week by Wall Street, some of Oracle's AI cloud services have a gross margin of only 14%. Anurag Rana, an analyst at Bloomberg Industry Research, stated: "This newly disclosed data helps alleviate concerns about low profitability." After this data disclosure, market confidence in the profitability of the AI infrastructure business strengthened. Oracle's stock price surged more than 5% at one point before retreating, and shares of industry peer CoreWeave also rose. Early business profit margins on the low side prompt skepticism Oracle's much-watched cloud business was reported last week to have weak profit margins due to the pressure of renting NVIDIA's advanced chips. According to media reports, in the company's most recent fiscal quarter ending in August, Oracle's server rentals generated $900 million in revenue and $125 million in gross profit, meaning that for every $1 in sales, $0.14 was profit—a gross margin of 14%. This is lower than the gross margins of many non-tech retail businesses, and far lower than Oracle's traditional software business, which has an overall gross margin of around 70%. The aforementioned documents show that, in some cases, Oracle recorded "considerable" losses due to small-batch rentals of new and old NVIDIA chips—for example, in the last fiscal quarter, it lost nearly $100 million from renting NVIDIA’s new Blackwell architecture chips. Risk Reminder and Disclaimer The market carries risk, and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investing accordingly is at your own risk.