The database giant had attempted to calm investor nerves during a financial analyst presentation on Thursday by projecting that its AI infrastructure business would achieve gross profit margins of 30% to 40% by 2030. The company also raised its revenue target for that year to $166 billion from $144 billion, implying a compound annual growth rate of 75% over five years. Shares climbed 3% on Thursday’s announcement. By Friday’s close, those gains had evaporated.
The Margin Problem
The margin projections came exactly one week after The Information reported that Oracle’s AI cloud business was operating at a 16% average gross profit margin, based on internal company documents. For the three months ending in August 2025, Oracle generated approximately $900 million in revenue from AI server rentals but recorded gross profit of only $125 million which is a 14% margin that stands in stark contrast to Oracle’s traditional cloud business, which enjoys margins around 70%.
The company reportedly lost nearly $100 million from renting Nvidia’s latest Blackwell chips alone during that quarter, highlighting the capital-intensive nature of competing in AI infrastructure against giants like Amazon Web Services, Microsoft Azure, and Google Cloud.
Wall Street’s Skepticism
JPMorgan analyst Mark Murphy noted that while Oracle’s revenue target appeared impressive, the underlying growth trajectory showed significant deceleration. Murphy’s analysis revealed that Oracle’s guidance implied net new revenue growth soaring to 150% in fiscal 2028 before decelerating sharply to 22% in 2029, with net-new revenue actually declining 27% in 2030.
“Overall, we sense investors weighing the impressive financial guidance against a feeling that it may set a very high bar with plenty of wood to chop for the next half-decade, and the poor track record of software companies collectively executing to 4-5-year-out guidance frameworks,”
Murphy wrote. Jefferies analyst Brent Thill highlighted another critical omission: Oracle provided no capital expenditure forecasts to accompany its revenue projections. Thill noted.
“Capex will need to ramp in line with OCI revenue growth, raising concerns about ORCL’s financing options to support this expansion,”
Those concerns carry particular weight given Oracle’s recent financial moves. The company raised $18 billion in debt in late September 2025, with proceeds earmarked for capital expenditures and cloud infrastructure expansion.
Analysts at KeyBanc Capital Markets estimate that Oracle may need to raise roughly $100 billion in additional debt over the next four years to build the infrastructure required for its existing contracts.
The OpenAI Gamble
Much of Oracle’s AI infrastructure ambitions center on its relationship with OpenAI, the company behind ChatGPT. In September 2025, Oracle confirmed a reported $300 billion agreement with OpenAI to develop 4.5 gigawatts of data center capacity over five years as part of the Stargate project, a $500 billion AI infrastructure initiative also involving SoftBank and Nvidia.
However, the economics underlying these agreements remain uncertain. OpenAI currently generates approximately $13 billion in annual revenue but continues to operate at a loss and isn’t expected to achieve positive cash flow until the end of the decade. The company’s ability to fulfill a $300 billion, multi-year payment obligation depends on continued investor funding and dramatic revenue growth.
Oracle co-CEO Clay Magouyrk emphasized that the company’s AI success extends beyond OpenAI. He revealed that Oracle booked $65 billion in new cloud deals over 30 days last quarter, including a $20 billion contract with Meta Platforms. “I know some people are questioning, ‘Hey, is it just OpenAI?’ The reality is, we think OpenAI is a great customer, but we have many customers,” Magouyrk said.
The Infrastructure Economics Challenge
Oracle’s stock volatility reflects broader questions about the sustainability of AI infrastructure investments. Management consultancy Bain & Company estimates that AI companies will need $2 trillion in annual revenue by 2030 to fund required infrastructure, creating an $800 billion shortfall even under optimistic scenarios.
The capital requirements are staggering. Oracle’s capital expenditures reached $21.21 billion in fiscal 2025, the highest in company history, pushing free cash flow into negative territory for the first time since 1992. The specialized Nvidia GPUs required for AI workloads command premium prices, and data centers require costly specialized networking, liquid cooling systems, and massive power capacity.
What’s Next
Despite Friday’s decline, Oracle shares remain up nearly 75% for 2025, reflecting the company’s emergence as a key player in the AI cloud space. Wall Street analysts maintain a Moderate Buy consensus based on 26 Buy ratings, eight Hold ratings, and one Sell rating, with an average price target of $346.63 implying approximately 11% upside.
Oracle’s challenge mirrors that of the broader AI infrastructure sector: balancing immense capital requirements against uncertain demand timelines and the brutal economics of competing on price while deploying the most expensive hardware in computing history. Friday’s stock decline suggests investors are increasingly skeptical that the math works, at least on Oracle’s ambitious timeframe.
The company’s ability to meet its 2030 targets will depend not just on AI adoption accelerating as projected, but on Oracle successfully navigating the transition from money-losing AI infrastructure deals to the profitable margins it has promised, all while managing a debt load that could exceed $100 billion and competing against rivals with deeper pockets and more established cloud platforms.
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