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The Backbone Of Clouds
In the tech industry, any company worth half a trillion dollars is obviously doing something right. When the same company is being put in charge of managing how to deploy half a trillion in cash to boost AI development in the US, it also clearly has solid credentials and influence. Still, many non-tech specialists would be hard-pressed to explain exactly what Oracle, the company discussed here, does.
Oracle Corporation (ORCL -15.2%)
This is because Oracle is mostly an IT infrastructure company, working with large corporations to build the tools for their cloud systems, including sales, inventory management, supply chain, human resources, etc.
So even when tens of millions of office workers use an Oracle product, they often do not know the company behind it; they see only the internal software used at their company.
This nevertheless means that Oracle is at the core of almost every IT infrastructure, including cloud systems and most AI deployment.
Oracle Overview
History
Oracle was founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates, selling the early computing systems “relational database management systems (RDBMS).”
In 1983, Oracle Version 3 was released, and it was the first commercially available RDBMS to support SQL, still today the main programming language for handling large databases.
Over the years, Oracle kept growing with the ever-expanding role of IT in businesses, and become a key component of a large portion of the world’s databases. This goes as far as 94% of Fortune 100 companies running on Oracle.
Oracle’s clients include countless large corporations, especially tech companies, R&D-driven companies, and large manufacturing corporations.
Source: Oracle
In 2024, it can fairly be said that Oracle’s business exploded, especially with cloud infrastructure revenues, up 51% year-to-year and 42% growth in customers with an annualized spend above $5M.
Oracle by Numbers
Oracle is a large company with 160,000+ employees, of which 18,000 are in customer support and 29,000 are consulting experts.
It made $53B in revenues in 2024 and has spent $80B in R&D since 2012. Revenues are forecasted to reach >$66B in 2026 and >104B in 2029, with >20% CAGR earning per share growth for the 2024-2029 period.
The company has been steadily raising its dividends in the past decade.
Source: Koyfin
Oracle Infrastructure
Oracle IT infrastructure is built around 2 central strategies to deploy its database management software.
The first one is partnering with almost every existing cloud provider so that Oracle products can easily be deployed to their hardware and servers. This includes Amazon’s AWS (AMZN -0.74%), Microsoft‘s Azure (MSFT -2.79%), and Google‘s Cloud (GOOGL -3.41%).
Source: Oracle
The second one is keeping up with other tech companies by building its own large-scale cloud infrastructure, with a focus on high geographical diversity to help create quick and localized data storage. The company has moved from just 5 services and 1,000 customers in 2016 to 192 services and 25,000 customers in 2024.
Source: Oracle
An important recent development in that strategy is a multi-cloud partnership with the 3 tech giants that gives the final customers direct access to Oracle Database services running on Oracle Cloud Infrastructure (OCI) and deployed in AWS, Google Cloud, and Microsoft Azure data centers.
Source: Oracle
The company is planning to keep expanding its cloud capacities through a large $15B capital expenditure in 2025.
Source: Oracle
Oracle Products
Oracle products and services include a mix of internally developed solutions (especially databases) and acquired products.
Databases
As a pioneer in database management and RDBMS, Oracle had a head start over its competitors and managed to maintain it 40 years later.
This was done through constant development to push forward the industry, including with popular third-party tools, for example, dbForge Studio.
This gives Oracle’s users a whole array of database products for enabling efficient data storage, retrieval, and analysis, for a wide range of different industries and organizations.
Cloud
The cloud segment is for cloud computing and hosting services, in contrast to just licensing software installed on someone else’s cloud (internal, or provided by a tech company).
This includes infrastructure as a service (IaaS) and platform as a service (PaaS), with software as a service included in the other categories.
In 2023, cloud service generated 13% of Oracle’s total revenues. This is a segment that exploded in 2024, with 51% year-to-year growth.
In the long run, this might be a major driver of revenue growth for Oracle, as this is a quickly growing market and the company’s reputation in cloud services is unmatched.
However, it should be noted that would Oracle become a little too successful in this segment, it might endanger some of the recently established multi-cloud partnerships with the 3 biggest and largest providers (Amazon, Microsoft, Google).
Source: Statista
ERP: Netsuite
Acquired by Oracle in 2016, NetSuite is the #1 cloud ERP (Enterprise Resource Planning) software designed to integrate into a coherent and unified whole finance, HR, manufacturing, supply chain, sales, and procurement.
Source: NetSuite
Since 2011, 62% of tech companies doing an IPO were a customer of NetSuite. 83% of Forces Cloud 100 list are NetSuite customers.
NetSuite is partnering with many third-party developers to make the ERP a platform on which to develop independent businesses providing extra value, like for example maintenance planning management tools, on top of the core functionalities.
Source: NetSuite
NetSuite is maybe one of the most important software for Oracle, as it works as the articulation point for its other offers in specific enterprise activity. For example, it connects together:
- NetSuite Cloud Accounting Software, for accounting, tax compliance, cash flow management, etc.
- NetSuite Global Business Management, for managing in 27 languages and 190 currencies the many subsidiaries, countries, branches, etc. of a complex large international company.
- NetSuite SuitePeople Human Resource Management System (HRMS) for all human resources management and payroll.
- NetSuite Professional Services Automation (PSA), for automating billing, forecasting, budgeting, etc.
- NetSuite Commerce, for online and in-store sales, orders, and inventory management.
- NetSuite Analytics & Reporting BI Tools, for analyzing and reporting on key metrics of the business.
- NetSuite Customer Relationship Management (CRM), to manage prospects, leads, and existing customers.
The way all of these services are sold is through a series of modules, which can be individually subscribed to, so that a company interested in adding e-commerce can add the matching NetSuite Commerce module to its pre-existing NetSuite ERP.
NetSuite’s service starts around $1,500/month (Starter Edition) and then goes on to add more functionality and user accounts for larger companies, at an increasing price.
Because usually, a given company will already have a system in place, NetSuite offers custom integration of new companies, with pricing ranging from €9,000 to €230,000 depending on the size of the business, complexity, and modules selected.
Oracle’s largest competition in the ERP segment is German SAP (SAP -0.71%), which has a stronger presence in smaller companies and on-site ERP, while Oracle is much more focused on large corporations and cloud-based solutions. Intuit (INTU +1.6%) is also a large presence in the cloud-ERP market.
CRM
While CRM (Customer Relation Management) is a part of NetSuite’s offer, the leader of this segment is Salesforce (CRM +5%), followed by a rather long series of competitors with a larger presence than Oracle.
Source: HG Insights
So this is more often than not a segment where companies use a non-Oracle CRM solution and pay for custom integration into their own ERP, including NetSuite.
Industry-Specific Softwares
While database, cloud, and ERP systems can be adapted for almost any industry, Oracle has made special progress in a few segments, often through the acquisition of smaller competitors or service providers, that are worth mentioning in particular.
Cerner / Oracle Health
With the acquisition of Cerner in 2022, Oracle suddenly grew in the digital health sector.
Today, Oracle is responsible for the world’s largest HER (Electronic Health Record) implementation, serving more than 9.5 million beneficiaries spanning the United States, Europe, and the Asia Pacific region.
It is also the largest revenue cycle management (RCM) leader providing predictive, and actionable health insights.
This activity covers public and private healthcare, life science research, and governmental health organizations.
The company also introduced its AI-powered clinical agent in June 2024. It is able to perform conversation-based note generation (in mere minutes) and the Oracle Clinical Digital Assistant for quicker access to essential data during consultations.
“Practitioners spend upwards of 20-35% of their time on administrative work.
Oracle Clinical Digital Assistant is the most important EHR technology update that I am going to see in my career. Since the 1990s, EHRs have turned physicians into keyboard junkies. This will change that.”
Point Of Sales
This segment was reinforced in 2014 by the acquisition of MICROS Systems in 2014 and FarApp and GloriaFood in 2021.
POS systems can be performed by Oracle Symphony for restaurants, hotels, resorts, casinos, stadiums, arenas, cruise ships, train stations, and retail stores.
This includes solutions for online ordering and delivery, management of tables in real-time, gift and loyalty programs, inventory, employees, menus, and reporting and analytics.
Utilities
With the acquisition in 2020 of LiveData Utilities, Oracle grew its preexisting activity in power and water utilities.
It provides “leading operational technology (OT) middleware solutions and SCADA capabilities to monitor and control utility equipment while reducing the complexity of real-time systems.”
This level of data integration is crucial for the deployment of smart grids, and overall much more connected monitoring equipment and IoT (Internet of Things) systems.
Defense & Intelligence
Oracle provides dedicated solutions for databases in strategic and critical applications. This includes military systems requiring extra security, robustness, and the ability to work in isolation.
And, of course, an extensive 45+ years of experience in dealing with required accreditations and secrecy levels.
The company offers its services at the same price as commercial services, making it a successful bidder in many tenders where defense contractors might be more expensive.
Project Stargate & AI
It is maybe the combination of its massive scale & experience with its in-road in military intelligence systems that have put Oracle at the forefront of the newly announced Trump administration push on AI.
Dubbed “Project Stargate“, this will be a $500B initiative for building data centers, making it, according to the US president, “the largest AI infrastructure project, by far, in history.”
The announcement was made with Trump, Larry Ellison, founder of Oracle, Masayoshi Son of SoftBank, and Sam Altman of OpenAI on the side of the US President.
Source: AP News
Ellison pointed out that the data centers are already under construction, with 10 being built so far. In total, 20 are planned, and the initiative should create 100,000 jobs.
“We just signed an agreement with Meta—for them to use Oracle’s AI Cloud Infrastructure—and collaborate with Oracle on the development of AI Agents based on Meta’s Llama models. The Oracle Cloud trains dozens of specialized AI models and embeds hundreds of AI Agents in cloud applications.
This comes in the context of Trump overturning the 2023 order signed by then-President Joe Biden to create safety standards and watermarking of AI-generated content.
To be Clarified
Who Does What?
Details are not there yet about exactly who will pay for what, and how much Oracle is expected to benefit from this project. But this has, anyway, been seen as very good news by the market regarding Oracle’s relevancy in the AI age.
Overall, financing seems to be provided by SoftBank(SFTBY -10.15%), OpenAI, Oracle, and MGX.
Arm, Microsoft, NVIDIA (NVDA -16.65%), Oracle, and OpenAI are the key initial technology partners.
Is It Realistic?
Project Stargate might not go without any hiccups, at least according to Elon Musk, who quickly criticized it for not being actually financed properly and has a well-known (mutual) dislike of Sam Altman.
“They don’t actually have the money. “SoftBank has well under $10B secured. I have that on good authority,”
This tension with Altman is apparently also viewed as the origin of this comment by Musk at the White House:
“When asked by a reporter whether Musk’s public criticism of the project upset him, Trump shrugged off the question.
“No, it doesn’t,” Trump said Thursday. “He hates one of the people in the deal.”
Another big interrogation point is how such massive data centers will be powered. This has been a major concern for Big Tech recently, with all of them scrambling to secure nuclear power for existing power plants, partnering with SMR companies (Small Modular Reactors), or even restarting closed nuclear power plants like Microsoft.
Qualified personnel might also be in short supply, especially as the Trump administration might struggle with its MAGA voting base in regard to H1b visas for foreign workers, after a rather intense public debate with Musk during the Christmas holidays.
Pushing Progress Faster
Among the expected outcomes of Project Stargate is not only a strong lead of the USA in AI technology, but plenty of new technologies as well.
Oracle’s AI Agents automate drug design, image and genomic analysis for cancer diagnostics, audio updates to electronic health records for patient care, satellite image analysis to predict and improve agricultural output, fraud and money laundering detection, dual-factor biometric computer logins, and real-time video weapons detection in schools.
For example, mRNA-based personalized cancer vaccines could be created for patients within 48 hours of analysis of their cancer. These vaccines could then be produced using robotic systems, speeding up the treatment even further.
(We already discussed this concept of cancer detection and customized treatment in our article “Best Early Cancer Detection And Liquid Biopsy Stocks”)
The DeepSeek Threat
A Blow Coming From Nowhere
Another, probably much more serious issue with Project Stargate is that some are already calling it obsolete barely a few days after it was announced. This is because a Chinese financial trading / quantitative hedge fund, High-Flyer, has released its own LLM (Large Language Model) AI called DeepSeek.
It came with performances similar to or maybe even superior to the latest and best model of OpenAI and other top AI companies, including the just released and acclaimed as a potential AGI o3.
Source: Jason Clarck
Except, there is a problem for the American AI industry.
DeepSeek has apparently been developed with a budget of only $6M. Mere millions of dollars, not billions nor trillions, the scale of required investments for AI development according to OpenAI and all the Big Tech companies.
To add insult to injury, the model has been released as open source and has even been described as a “side project” by the quant team responsible for its development.
Breaking AI Stocks?
The release of DeepSeek has sent an earthquake throughout Silicon Valley and the damages are still to be determined. Everyone expected AI technology to move fast, but maybe no one expected it to move that fast.
DeepSeek could seriously threaten the business model of all AI companies, counting on massive hundreds of billions of revenues to pay off the expensive AI data center they built and are building.
DeepSeek offers its ChatGPT and o3-like LLM for only a few percent (around 3%) of the normal price for OpenAI LLMs, making its cost almost trivial.
As of the writing of this article, Nvidia’s stock, a darling of AI investors, had fallen by as much as 14.5% in a day in reaction to the news, with Oracle’s stock down 9%.
Changing Our Collective Mind About AI Investing?
DeepSeek’s achievements have been acclaimed by heavyweights in the tech industry. One of them is Marc Andreessen, the co-author of the first web browser (Netscape), a serial tech founder and major investor, calling it ‘AI’s Sputnik moment’
Source: Marc Andreessen
Another voice is Chamath Palihapitiya, an influential venture capitalist and SPAC sponsor.
He worries that AI model building might be so exposed to disruption that massive hardware build-up might be a “money trap”. And it could be true if massive computing power turns out to not be needed after all.
Source: Chamath Palihapitiya
It is definitely still too soon to decide, and also to be sure of what is behind DeepSeek’s success, with many already suspecting a nefarious conspiracy of secret funding from the Chinese government and the use of sanctioned import of advanced AI chips.
In the context of the not-banned-after-all TikTok and market volatility, no wonder tempers run hot.
Conclusion
Oracle is the database company, with its cloud databases the core of every IT infrastructure of almost every large corporation and institution on Earth. This makes the company a central part of the trend of digitalization.
Its presence in the ERP market with NetSuite reinforced this position, as this type of software / SaaS is where business data are getting centralized. It also has a strong position in niche industries like, for example, healthcare.
Lastly, Oracle is growing quickly its cloud hardware infrastructure and will likely be a winner from the growth of the cloud market, directly and indirectly.
It is unclear how advancement in AI like DeepSeek could impact Oracle in the short term, potentially throwing a wrench into Project Stargate’s gears. But in the long term, if LLMs and other AI tools become widespread, low-cost, and open source, the utilization of AI will certainly explode.
This, in turn, should dramatically increase the need to digitalize business data in a coherent and connected way, with ultra-reactive and real-time localized cloud solutions.
If so, who else than Oracle, the “database & ERP” company, with a side serving of cloud infrastructure, would benefit more from that trend in the long term?
