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The biggest news today wasn’t Apple’s new line of iPhones—that was about as much of a secret as the time of tomorrow’s sunrise (for more details of the Apple presentation, see below)—but Oracle’s blockbuster revenue projections. The software-and-cloud firm is enjoying what you might call its Nvidia moment. It is finally showing the benefits of signing AI firms like OpenAI to use its cloud services. Its new revenue forecasts sent investors into a frenzy, lifting Oracle stock as much as 27% to $307 a share in after-hours trading, which is not the usual reaction the 48-year old tech veteran gets to its quarterly earnings updates.
Oracle reported that a spate of new contracts lifted the backlog of its business—the work it has contracted to handle but hasn’t yet recognized in revenue—by 359%. That reflects new contracts signed in the August quarter with three unidentified customers, it said, one of which was likely to be OpenAI. The backlog underpinned Oracle’s projections that revenue from its cloud server rental business will soar to $144 billion by fiscal 2030 from $10 billion in fiscal 2025. That’s a startling projection, given that the cloud server rental business is currently only a small part of Oracle’s revenue and yet the 2030 projection is pretty much what Wall Street analysts currently project for all of Oracle.
Further context: Amazon Web Services, which is the cloud industry leader, generated $116 billion in the 12 months to June. If Oracle, the fifth in the market, expands that much in the next five years, then AWS and its bigger rivals surely will as well. Still, the projections give a sense of how much Oracle’s cloud business, until recently an also-ran, is suddenly being transformed into a decent-sized operation by AI deals.
One important question, though, is how solid are these projections? Companies are contracting with Oracle and its bigger cloud rivals—Amazon, Microsoft and Google—as well as newer firms like CoreWeave to handle explosive growth in demand for AI processing. What happens if AI demand weakens, because businesses decide AI products aren’t worth the cost?
That’s of course a risk for everyone, arguably even more for bigger companies that are spending many times what Oracle is laying out to build capacity. Still, it’s a near-term risk for Oracle, which is burning cash right now to build capacity, unlike the bigger firms. Oracle CEO Safra Catz revealed on Tuesday that capital expenditures for the current fiscal year will be $35 billion, 67% higher than fiscal 2025, and $10 billion more than what Oracle had projected for the year’s capex just a few months ago.
Of course, right now, Oracle executives are jubilant. On an earnings call, executive chair Larry Ellison kept talking about Oracle’s “tremendous advantages,” while Wall Street analysts tripped over themselves congratulating the company. The stock has nearly doubled since the start of the year. But the risks remain.
Apple’s Back to Basics
Move over AI: Battery power and device size is back as a smartphone selling point. That, at least, is the message from Apple’s latest iPhone product update presentation on Tuesday. As widely telegraphed, the tech giant unveiled both a thin version of the iPhone as well as updated Pro and basic models of the device. While Apple’s artificial intelligence features got a mention, executives paid much more attention to more mundane features of the phones such as their durability.
A cynic might argue Apple is minimizing AI because it’s behind rivals like Google, whose new Pixel 10 is packed full of AI-powered features. That’s likely true but perhaps it’s a fortunate position to be in. It’s a good bet the average phone buyer doesn’t yet care too much about AI features on phones, given how useless they’ve so far proved to be. I bought the Pixel 10, and quickly realized its AI-powered “Magic Cue” feature that’s supposed to pull information from various apps was much ado about nothing, so far offering nothing of value. (Judging from commentary on Reddit, I’m not alone in that view.) In contrast, consumers have long complained about inadequate battery power or phones that break too easily.
Apple certainly aimed to deliver on those fronts with the upgraded iPhone 17 Pro, raving about both its durability and battery power. But the star of the presentation was the new thin iPhone, the Air, which Apple is surely hoping will prompt some people to upgrade earlier than they might have otherwise. Maybe that will happen, although the presentation only confirmed past news reports (such as this one from The Information) that Apple had to compromise on some key features to achieve the thin design—most obviously with weaker battery capacity than other iPhones.
While Apple said the iPhone Air had “remarkable all-day battery life,” the only precise specification it offered—hours of video playback, which now appears to be Apple’s standard measure of battery strength—was when an extra battery pack was attached to the phone. Suggesting people who buy a phone billed as “so thin and light it seems to disappear in your hand” attach a heavy battery extra seems to defeat the entire purpose of the new device. Notably, the Air’s price starts at $999, which is $100 less than that of the iPhone 17 Pro, which implies Apple still sees the Pro as its most premium item.
As we and others have written, the iPhone Air is the first of what’s expected to be a couple of big design changes for the iPhone, after several years of incremental tweaks that had sparked criticism about Apple’s lack of imagination. Next year, for instance, the company is expected to release a foldable iPhone, catching up with Samsung, Google and other Android phonemakers. That makes consumer response to the Air something to watch closely.
In Other News
• Microsoft is planning to use models from OpenAI’s chief rival, Anthropic, to power AI features in its Office 365 software, after previously relying on OpenAI’s models for the AI features, The Information reported.
• Snap CEO Evan Spiegel says Snap is in a “crucible moment,” squeezed “between the tech giants and smaller competitors,” and he vowed to sharpen the company’s focus. He announced plans to shake up the company by creating a series of “working groups” to deal with key issues, including to improve the company’s computer systems.
• Nvidia on Tuesday unveiled a new graphics processing unit designed to power existing AI, known as inference workloads.
• CoreWeave is starting a venture fund to invest in AI startups, including through what it calls compute-for-equity models.
• Google has appointed Alykhan Kurji, a longtime Googler who has worked on partnerships for Google devices like Pixel and Home, to take over a team within Google News Partnerships. In a LinkedIn post, he said he would be leading “AI and content licensing deals” with some of Google’s most strategic publishers.
Today on The Information’s TITV
Check out today's episode of TITV in which we talk to MercadoLibre's CFO about competition from China discount retailers, whether or not AI is a threat to its business and the e-commerce landscape in Latin America.
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