Oracle tells investors not to worry about data center spending because its 'very, very good' at cost-cutting

Oracle has addressed investor worries regarding its aggressive spending on data centers, emphasizing its commitment to efficiency and cost-effectiveness. Shares of the cloud leader surged by as much as 10% on Tuesday following a strong third-quarter performance that exceeded expectations, prompting the company to raise its revenue forecast to $67 billion for fiscal 2026. However, questions lingered about Oracle's significant investments in AI data centers and how the company plans to manage its substantial expenditures. Earlier this year, Oracle announced a $50 billion debt initiative to support its AI development. Over the past year, the firm has unveiled ambitious data center projects across Texas, New Mexico, and Michigan. During Oracle's earnings call, Bernstein analyst Mark Moerdler inquired about the company's confidence in the value generated from its AI data center operations. Co-CEO Clay Magouyrk reassured investors that Oracle is honing its capabilities to minimize costs associated with data center expansion, aiming to enhance future profitability. "We continue to improve our operations, reducing the costs of networking, hardware, and power consumption," Magouyrk stated. He also highlighted the company’s focus on shortening construction timelines for new facilities, claiming, "We're very good at reducing those costs during that time period." While he did not divulge specific strategies for managing the data center budget, he stressed Oracle's ongoing efforts to streamline operations. In 2022, Oracle initiated significant cost-saving measures, which included layoffs following its substantial $28 billion acquisition of Cerner, a major player in medical records. Earlier reports indicated that the company was facing challenges securing financing for its ambitious $500 billion Stargate data center project in partnership with OpenAI. Concerns from lenders and investors have surfaced regarding the project's scope as Oracle competes with other tech giants, including Amazon, Microsoft, Google, and Meta, who collectively plan to invest $600 billion in data centers and AI infrastructure by 2026.