CNN

How boring Oracle became cool again

<i>Evan Vucci/AP via CNN Newsource</i><br/>Larry Ellison

By CNN Newsource

Published September 16, 2025 4:30 am

By Clare Duffy, CNN

New York (CNN) — In the late 1970s, a startup founded by Larry Ellison and two fellow computer programmers got a big break in the form of a CIA contract to build a database program code-named Oracle, which later became the name of the company.

Now, nearly 50 years after its founding, the database and enterprise software giant has gotten another big break. It has become a key player in the artificial intelligence boom, with its cloud computing business helping to meet crushing demand for computing power for AI applications. One of its most prominent partnerships is with industry leader OpenAI, which reportedly agreed earlier this month to pay Oracle $300 billion over five years for data center space.

Oracle’s eye-popping growth projections for its cloud business — laid out in its latest earnings report last week — sent its shares soaring. Oracle’s (ORCL) stock is up more than 80% since the start of this year, outpacing Nvidia, Google, Meta and Microsoft. The surge briefly made Ellison, now the company’s chairman and largest shareholder, the world’s richest person.

Like Nvidia, which was known as a niche gaming processor company before it started producing must-have AI chips, Oracle’s recent rise is an example of how Silicon Valley stalwarts are seeing new life and opportunity in the AI era.

“It’s a watershed moment for Oracle,” said Synovus Trust Company senior portfolio manager Daniel Morgan, comparing it to when Nvidia’s AI chip business began outpacing its gaming business. “A year ago, Oracle was a company that was kind of tripping through and trying to find its way … and now all of a sudden, we have massive validation of its strategy paying off.”

And Oracle could gain another feather in its cap if it’s part of a deal to transfer control of popular social media app TikTok’s US operations to an American entity. White House officials said Monday that a framework for such a deal is nearly final, pending a conversation between President Donald Trump and Chinese President Xi Jinping on Friday.

It’s not clear who the prospective buyer in the deal is, but Oracle had previously been considered a top contender to take over the app. Oracle began hosting TikTok’s US data in 2020, part of an effort to assuage American national security concerns. And taking over full or partial control of TikTok’s US operations could give Oracle access to one of the world’s most popular apps and the 170 million American users and ad revenue opportunities that come with it.

Oracle declined to comment for this story.

A cloud latecomer now a key player

Oracle was late to cloud computing, trailing other big players like Amazon Web Services, Google Cloud and Microsoft Azure. Ellison in 2008 even called the technology “complete gibberish.”

And although it remains smaller than those other “hyperscalers,” Oracle’s cloud computing business began to turn a corner in 2022 — the year ChatGPT launched to the public — when AI companies realized building out their large language models was going to require massive computing power, Morningstar equity analyst Luke Yang told CNN. He added that Oracle’s close relationship with Nvidia also gave the company easier access to the in-demand AI chips required to power its burgeoning data center business.

During last week’s earnings call, Oracle CEO Safra Catz said the company’s cloud infrastructure revenue is expected to grow 77% to $18 billion in its 2026 fiscal year and to hit $144 billion by 2030.

That’s thanks in large part to a huge jump in “remaining performance obligations” (RPOs) — or contracted future revenue the company expects to collect on — which were up 359% year-on-year to $455 billion in the most recent quarter. Catz said the company signed four multi-billion-dollar contracts with three different customers during the quarter.

Brian White, tech analyst for investment firm Monness, Crespi, Hardt & Co, called it a “shooting fish in a barrel” moment for Oracle as demand for data center capacity across the AI industry continues to outstrip supply, adding that the company is “living the AI dream.”

Oracle’s close partnership with OpenAI has helped to legitimize it as a presence in the AI computing space. In January, Ellison announced that Oracle would join a $500 billion initiative to create a new company, Stargate, to invest in building out more AI infrastructure in the United States.

It may even have an advantage over other big data center players, like Google or Microsoft, because Oracle isn’t building its own large language model that would otherwise occupy some of its data center space, giving it more computing capacity to rent out. “That is doing the company a favor and the entire AI ecosystem,” Yang said.

It’s also helped that Oracle’s core database and software businesses are logging fairly steady growth, giving it the cash to continue the capital-intensive process of building out more data center capacity. The company reported more than $27 billion in capital expenditures in the first quarter alone.

Those tentpole business units generate “about 70% of their revenues,” Morgan said. “Then if they’re able to have some success with the data center and the infrastructure as a service (businesses), that’s just going to be icing on the cake for them. They don’t live and die by it.”

Still, for Oracle to maintain its aggressive growth projections, it will need AI companies to continue shelling out for additional computing power, even as some industry watchers have begun to raise questions about the returns on those pricey investments.

“We do see a scenario where total AI demand undershoots our expectations, and, if that happens, Oracle might take a harder hit than the other three hyperscalers, because it is a relatively small player within the entire ecosystem,” Yang said. “If AI is not expanding as fast as we are expecting, those RPOs might not come as big as it is as what we see today.”