Oracle Shares Retreat After Record High on OpenAI Revenue Concentration Concerns
Oracle’s stock fell 6% on Thursday after closing at an all-time high the previous day. The decline followed analyst concerns that the company’s anticipated growth heavily depends on a single client, OpenAI.
Earlier in the week, Oracle’s CEO Safra Catz announced the company had secured four multi-billion-dollar contracts with three customers during the latest quarter. Oracle’s remaining performance obligation—a metric representing contracted but unrecognized revenue—reached $455 billion, marking a 359% increase year over year.
The company forecasts its cloud infrastructure revenue to increase fourteenfold by 2030, reflecting an aggressive expansion effort. This growth is driven by demand for infrastructure capable of supporting applications built on advanced artificial intelligence models, which frequently run on Nvidia chips.
Following Oracle’s fiscal first-quarter results announcement, the stock surged nearly 30% in after-hours trading on Tuesday and closed Wednesday up almost 36%, reaching a record $328.33 per share.
However, enthusiasm dampened after The Wall Street Journal reported that OpenAI is expected to pay Oracle approximately $300 billion over five years. This follows OpenAI’s recent announcement of a partnership with Oracle to develop 4.5 gigawatts of U.S. data center capacity. Both companies declined to comment on the report.
Gil Luria, an analyst with a neutral rating on Oracle shares, expressed caution in a client note, stating, “Our enthusiasm for Oracle’s backlog announcements is significantly tempered by the report that it came almost entirely from OpenAI.”
FinOracleAI — Market View
The market reaction reflects investor concerns about Oracle’s revenue concentration risk as the company’s growth appears heavily reliant on OpenAI. While the backlog and contract wins indicate strong demand, dependence on a single client raises risks if OpenAI’s needs or spending change. Investors should monitor Oracle’s ability to diversify its customer base and deliver on its ambitious cloud infrastructure expansion plans. Additionally, the evolution of AI workloads and competition in data center services will be critical factors.
Impact: negative
