Oracle’s stock declined 5% on Tuesday following a report from The Information that raised concerns about the profitability of its AI cloud services.
Citing internal documents, the report revealed that Oracle’s business of renting Nvidia chips to clients like OpenAI generated a gross margin of only 14% on $900 million in sales in the three months ending in August. This figure stands in stark contrast to the company’s overall gross margin of approximately 70%. The report attributes the low profitability to the high cost of Nvidia hardware and Oracle’s aggressive pricing for its AI chip rental services.
These concerns emerge despite Oracle’s recent optimistic projections. In September, the company announced that its backlog of cloud contracts had surged 359% in a year and forecasted its cloud infrastructure revenue would reach $144 billion by 2030, a significant increase from just over $10 billion in 2025.
A substantial portion of this projected growth is tied to the Stargate project, a major collaboration between Oracle, OpenAI, and SoftBank. The initiative, which has received promotional support from President Donald Trump, involves building five massive data centers across the U.S. filled with Nvidia’s AI chips, positioning Oracle as a critical infrastructure provider for the artificial intelligence industry.
