Sources of Oracle future revenue growth
The following three areas will be Oracle growth drivers in the future.
TikTok in the US
Oracle has been TikTok’s data operator in the United States since September 2020. However, due to the US insistence that TikTok’s US operating shares must be owned by American companies, the two countries reached a preliminary agreement in September 2025. According to the official statement released by the US government:
- Trump approved the transaction on September 25, with a valuation of US$14 billion. The newly established TikTok US board of directors will have seven seats, six of which will be held by Americans. ByteDance can only appoint one director, and its shareholding ratio cannot exceed 20% to comply with the requirements of the 2024 law.
- Oracle will continue its existing role, data of TikTok users in the United States will be supervised by Oracle, Oracle will lead security services, data storage, and privacy protection for TikTok’s US operations, and the platform algorithm must be retrained.
- Abu Dhabi-based AI investment company MGX will also become a major investor along with Oracle and Silver Lake Capital, holding a total of approximately 45% stake. At the same time, some existing shareholders of TikTok’s parent company ByteDance, including Susquehanna International Group, General Atlantic and KKR, will hold a total of approximately 30% of the shares.
The Chinese government stated:
- China and ByteDance will maintain TikTok’s operations in the United States and have not “sold” TikTok’s US operations. The algorithm remains ByteDance’s property and has been licensed to TikTok USDS, which is responsible for data security.
- BD TikTok US will be responsible for advertising, e-commerce, and cross-border commerce activities. ByteDance will continue to own the intellectual property rights to the TikTok algorithm.
- TikTok USDS will be responsible for data storage and security, content safety assurance, software review, and listing approval–This part is controlled by the American investment team.
- ByteDance will charge licensing fees for providing algorithm technology to US operating entities and share profits according to its shareholding ratio. Overall, the company is still likely to obtain more than half of the profits from its US business.
- TikTok’s US operations will pay ByteDance a substantial licensing fee for the use of algorithmic technology, which is central to the service’s user stickiness. Sources familiar with the matter said ByteDance could receive a 20% royalty on revenue generated by the algorithm.
This is the main reason for Oracle’s recent stock price surge, and it will continue to be so in the future—because TikTok is incredibly popular in the US, especially among young people, where it’s practically universally used.
In short, according to the latest discussions, TikTok’s US operations will be split into two entities: one controlled by a newly established US joint venture, responsible for US user data and algorithms (licensed by ByteDance); the other, wholly owned by ByteDance, responsible for revenue-generating businesses such as advertising and e-commerce. Oracle has been, is, and will continue to be the dominant vendor in TikTok’s US operations.
Cloud and Data Center
Remember, in January 2025, OpenAI, SoftBank, and Oracle held a White House press conference to reach a partnership agreement to jointly fund the construction of the Stargate data center over the next four years. Oracle is one of the three major companies involved in the US Stargate Nation’s $500 billion plan. So far, Oracle’s stock price has risen the most, for no other reason than that it’s the only one of the three making significant profits.
In addition to the United States, Oracle has announced plans to establish or expand data centers in Germany, the Netherlands, the United Arab Emirates, Saudi Arabia, Japan, Malaysia, Canada, the United Kingdom, Germany, Switzerland, Australia, Chile, Brazil, and Israel.
On October 8, 2025, Oracle reported that SoftBank Group and Oracle are collaborating to provide secure, compliant, and scalable sovereign cloud and AI services to Japanese businesses. SoftBank will launch a new service called Cloud PF Type A, based on Oracle Alloy, providing SoftBank’s unique cloud and AI services to the Japanese market.
Artificial Intelligence
During Oracle’s second-quarter earnings call, founder Larry Ellison, now in his eighties and the company’s Chief Technology Officer (CTO), explained that Oracle is currently undertaking a major initiative to enable customers using its database to upgrade and integrate content search through artificial intelligence—a highly forward-thinking design.
In the second quarter earnings call, Ellison said, “With the launch of our new AI database, we’ve added a very important new way for you to store data in our database: you can vectorize it. By vectorizing all your data, all your data can be understood by AI models. And then we make it very easy for customers to directly connect all of their databases, all of the new Oracle AI databases and cloud storage (OCI Cloud Storage) to the world’s most advanced AI inference models, like ChatGPT, Gemini, Grok, Llama, all of which are exclusively on Oracle.” Available in Oracle’s cloud services.
Users will see: “After you vectorize your data and connect it to your chosen LLM (Large Language Model), you can ask any question you can imagine. For example, ‘How will the latest tariffs affect next quarter’s revenue and profit?’ You ask the question, and the LLM then applies high-level reasoning to a combination of your private enterprise data and publicly available data. You can get answers to important questions without compromising the security of your private data.”
Operating Performance
Q2 CY 2025 Financial Results
The following are highlights of the financial results for the second quarter of 2025, which ended on August 31:
| Index | BU | Sub-BU | Number | Annual growth rate |
| Non-GAAP EPS | 1.47 | 6% | ||
| Revenue | 14.93 billions | 12.30% | ||
| Cloud | 7.186 billions | 27.80% | ||
| Cloud Infrastructure (IaaS) | 3.3 billions | 55% | ||
| Cloud applications | 3.8 billions | 11% | ||
| Fusion cloud ERP | 1 billions | 17% | ||
| NetSuite cloud ERP | 1 billions | 16% | ||
| Software support | 4.955 billions | 1.20% | ||
| Software license | 0.766 billions | 12% | ||
| Hardware | 0.67 billions | 2.30% | ||
| Service | 1.349 billions | 6.80% | ||
| Operating income | 4.684 billions | 15.34% | ||
| Non-GAAP net income | 4.3 billions | 8% | ||
| Operating income | 8.14 billions | 9.60% | ||
| CapEx | 8.502 billions | 269.17% | ||
| Free Cash Flow | -0.362 billions | -107.06% |
Q2 CY 2025 highlights
- Remaining Performance Obligations (RPO) are expected to explode, rising sharply to $455 billion, a 359% year-over-year increase and a $317 billion increase from the previous quarter. The CEO has publicly stated that the company’s RPO could exceed $500 billion in the next quarter.
- Cloud infrastructure revenue is expected to grow 77% in fiscal year 2026, reaching $18.25 billion, and then to $32 billion, $73 billion, $114 billion, and $144 billion in the next four years.
- Four large contracts were signed with three different customers in the second quarter.
Cloud Computing and Data Center
Total cloud computing revenue (including applications and infrastructure) grew 27% year-over-year in the second quarter, reaching $7.2 billion. Cloud infrastructure (OCI) revenue increased 54% year-over-year, reaching $3.3 billion. Consumer revenue from OCI grew 57% in the second quarter, indicating that demand far outstrips supply.
Oracle currently has 34 multi-cloud data centers in operation, with an additional 37 scheduled for delivery, bringing the total to 71.
Outlook
During the second-quarter earnings call, the CEO expected more similar deals in the coming months, pushing the backlog to over $500 billion. Oracle forecasts that cloud infrastructure revenue will grow 14-fold by 2030.
For fiscal year 2026, the company remains confident and committed to achieving 16% total revenue growth. Capital expenditures for fiscal year 2026 will reach $35 billion, driven by strong growth in return-on-purchase (RPO).
Top Customers
During the second-quarter earnings call alone, Oracle announced multi-billion dollar contracts with five diverse customers, bringing the company’s return-on-purchase (RPO) to $455 billion. These customers include OpenAI, xAI, Meta, Nvidia, and AMD. Additional multi-billion dollar customers are expected to be signed in the coming months.
Investment Risks
Revenue rely on a single customer
Oracle’s massive order book for the second quarter of 2025 carries multiple risks, primarily because the majority of future growth will come from a single customer, OpenAI.
OpenAI has signed a contract with Oracle to purchase $300 billion worth of computing services over approximately five years, starting in 2027 and averaging approximately $60 billion annually.
OpenAI alone accounts for 95% of the $317 billion in new RPOs reported in the second quarter of 2025.
High Uncertainty
Most of this revenue may not be recognized until the distant future, and the majority of the new orders are related to AI model training, a business with relatively low profit margins. Questions remain about whether Oracle has sufficient funds to finance the astronomical infrastructure investment required to support this massive order. Of the $455 billion in RPOs disclosed in the second quarter, only approximately 10% will be recognized as revenue within the next 12 months.
AI data centers low profit margin is very low
On October 7, 2025, the technology news website The Information, citing internal Oracle documents, reported that Oracle generated approximately $900 million in revenue from leasing servers equipped with Nvidia chips in the second quarter of 2025, ending in August. However, its gross profit was only approximately $125 million, equivalent to a gross profit margin of only 14%, far below Oracle’s overall gross profit margin of approximately 70%.
In its second-quarter 2025 financial report, the company’s gross profit margin was 67.3%, the lowest level in over a year.
Following the news, Oracle’s stock price plummeted 7.1%. The report noted that in some cases, Oracle even incurred “substantial” losses when leasing a small number of Nvidia chips, including new and older GPUs.
Capital Market Performance
Market Capitalization
Before Oracle released its financial report and guidance, the company’s market capitalization was approximately $670 billion, ranking it the 15th largest publicly traded company on the US stock market. However, the day after the second-quarter earnings report was released, its stock price surged 35.95%, pushing its market capitalization to $930 billion, making it the 11th largest publicly traded company on the US stock market.
Ellison Instantly Becomes the World’s Richest Man
Buoyed by Oracle’s surge in stock price, Larry Ellison’s wealth skyrocketed overnight, briefly surpassing Musk to become the world’s richest man. Ellison owns approximately 1.15 billion Oracle shares, representing 42% of the company’s outstanding shares. Note that Oracle is a 40-year-old publicly traded company with a market capitalization of nearly $1 trillion, and its founder still owns 42% of the shares, making it a significant anomaly in the capital market.
Capital expenditures are jeopardizing profits
Capital expenditures for fiscal year 2026 are projected to reach $35 billion. Just-released second-quarter capital expenditures were $8.502 billion, a 269.17% year-over-year increase!
Market estimates for Oracle’s annual capital expenditures have increased by 180% compared to a year ago. Oracle’s cash burn rate is currently outpacing its cash accumulation rate, with free cash flow of negative $362 million in the most recent quarter.
Once the leases take effect and the assets begin to be used, these operators will begin to charge related expenses, which will begin to erode profits.
Bond Raising
On September 24, 2025, Bloomberg reported that Oracle is seeking to borrow $15 billion from the U.S. investment-grade bond market, planning to issue up to seven tranches of bonds, including a rare 40-year bond. Preliminary pricing discussions for these tranches are approximately 1.65 percentage points above the yield on U.S. Treasuries over the same period.
Credit Ratings
Moody’s Investors Service cited several potential risks in Oracle’s $300 billion artificial intelligence contract, but has not yet taken rating action on the software giant. These risks were identified in Moody’s rating action in July, when it downgraded Oracle’s credit rating outlook from stable to negative. Currently, Moody’s assigns Oracle an issuer rating of Baa2, which is at the lower end of the investment-grade credit rating scale.
Stock Performance
I will not talk about Oracle’s 35.95% soar day after its Q2 earnings report, sending its stock price to a record high and its best single-day performance since 1992. This surge added $244 billion to its market capitalization, bringing its total market capitalization to $922 billion.
I’m talking about the 35.95% surge the day after the Q2 earnings report, and the subsequent decline since then. It’s a significant drop of nearly 20% in two weeks. Why? Wasn’t the Q2 earnings release truly astonishing?
Investors began to pull back
The reason is that investors began to see the bright spot in the Q2 earnings report: the explosive 359% year-over-year increase in remaining performance obligations (RPOs). Wall Street began to calm down, realizing there were too many uncertainties. The RPOs likely wouldn’t live up to Oracle’s hype, and they might not even materialize. There are countless examples of this happening; at least not all of them will.
Oracle issued $26 billion in corporate bonds, the largest amount ever issued by a tech company this year. Even Moody’s cited numerous risks in its latest rating action in July (before the release of its second-quarter earnings report)—downgrading Oracle’s credit rating outlook from stable to negative. Moody’s currently rates Oracle’s issuer at Baa2, just Baa3 away from junk bonds—a rare occurrence among large public companies, and even more so among tech companies.
Conclusion
Investors should be reminded: Things that appear too good to be true are usually not; there are always issues. Concerns about an AI bubble and financial pressures are not unfounded, and investors should proceed with caution. If the AI database project is implemented, customers will be able to leverage their own data to automatically perform model inference, and AI usage will increase by more than a thousandfold—this will fulfill Oracle’s long-term strategy of building an integrated “AI Enterprise Services” ecosystem, integrating AI computing infrastructure with applications such as ERP, human resources, and databases to provide comprehensive solutions to large enterprise customers.
I am the author of the original text, the essence of this story was originally featured on Money Magazine, Issue of November 2025
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