Oracle rises after discussing AI infrastructure margins

Shares of Oracle (ORCL) are up $16.05, or 5%, to $319.67 in afternoon trading after sharing its margin expectations for AI infrastructure projects in a presentation to investors at its annual conference in Las Vegas. According to a transcript of the event, executives stated: “So as an example let’s imagine that somebody shows up and they want to buy you know approximately a gigawatt of GPU accelerators. Right. And they sign a contract for six years, which would be six years at $10 billion a year. It’s a $60 billion TCV… So in this example deal of $60 billion. I’ve written down here, okay, a 35% margin deal right in the middle of that 30 to 40% margin range. But the thing to understand is when I talk about this 35% margin, it doesn’t just include each year after it’s running, that 35% includes the fact that there’s a startup cost up front. Now, obviously, if you can imagine if you were to put a demarcation line before year one starts, we have an expense with no compensating revenue yet, and that can be happening across many different sites, right? We’re building not one of these things. We’re building 1020 of them at a time. And based on the delivery schedule and our ability to ramp and put the capacity in there, you’ve got a waterfall across many of these different pieces of infrastructure, where some are now starting up, some are now giving you a ton of cash flow off. And part of the job that we do is we’re constantly laying those things together to understand how our overall business works.”