OpenAI agreed to pay Oracle $30B a year for data center services

OpenAI has officially entered into a groundbreaking agreement with Oracle, committing to pay $30 billion annually for data center services, as reported by The Wall Street Journal. This revelation was confirmed by OpenAI's CEO, Sam Altman, who shared details about the contract in a recent post on X and on the company's blog. The deal first came to light when Oracle announced in an SEC filing on June 30 that it had secured a cloud contract expected to generate $30 billion per year in revenue. However, the specifics regarding the client were initially undisclosed, sparking widespread speculation about which company could require such extensive data center services. Following this announcement, Oracle's stock surged, reaching an all-time high, which propelled its founder, Larry Ellison, into the ranks of the world's wealthiest individuals, according to Bloomberg. While Oracle’s total sales of cloud services for its fiscal year 2025 were reported at $24.5 billion across all customers, the scale of OpenAI's commitment is unprecedented. The $30 billion deal is part of a larger initiative known as Stargate, a colossal $500 billion project aimed at building data centers, which OpenAI, Oracle, and Softbank announced in January. Notably, the capacity involved in this contract is a staggering 4.5 gigawatts, equivalent to the output of two Hoover Dams, enough to power approximately four million homes. However, this venture is not without its challenges; both companies must undertake the substantial task of constructing this sizable data center, which will require significant financial and energy resources. The Stargate I site in Abilene, Texas, will serve as the location for this massive undertaking. Oracle's CEO, Safra Catz, revealed that the company spent $21.2 billion on capital expenditures in the last fiscal year and anticipates spending around $25 billion in the current year, totaling nearly $50 billion over two years, primarily on data centers. Interestingly, Altman disclosed that OpenAI recently achieved an annual recurring revenue of $10 billion, a significant increase from $5.5 billion the previous year. This new commitment to Oracle represents a threefold increase in annual revenue for OpenAI, not accounting for its other operational costs and existing data center obligations.