Oracle is rapidly expanding its US AI data centers, planning to spend about $35 billion in 2026 to meet the growing demand for AI training and inference. The growth is boosting Oracle Cloud Infrastructure (OCI) revenue, but it is also straining the company’s finances, causing more debt and possible job cuts.
Impact on Cloud Costs and Pricing Strategy
Even with these high expenses, Oracle aims to stay a low-cost cloud service provider. WSJ
- Competitive pricing: OCI still offers much lower prices, often 50% less or more on compute, block storage, and networking compared to other major cloud providers
- Lower egress fees: Oracle’s data egress fees can be up to 10 times lower than competitors, and the first 10 TB each month are free
- Same price promise: OCI keeps prices the same in every region worldwide, so organizations can avoid regional price changes and plan their budgets more easily.
- Support rewards: for every dollar spent on OCI, customers can cut their on-premises support costs down by 25 cents, which could bring support bills down to zero
Data Center Expansion And AI Focus
- Massive infrastructure boost: Oracle is building huge AI facilities, including projects with OpenAI that will have up to 4.65 gigawatts of data center power in the US
- New locations: Oracle is expanding in Texas, Michigan, Wisconsin, and New Mexico.
- Energy strategy: To handle high power needs, Oracle is working with Bloom Energy to get up to 2.8 gigawatts of fuel cell systems for its AI data centers.
- Rising costs and financing: To pay for this growth, Oracle plans to raise $45 to $50 billion in 2026 through debt and equity. This spending has led to reports of cost-cutting inside the company, including possible layoffs.
Market Impact And Performance
- Strong growth: Oracle Cloud Infrastructure revenue grew by 84% year over year in Q3 2026, reaching $4.9 billion.
- High demand: Demand for Gen 2 AI infrastructure exceeds supply, and remaining performance obligations have grown by 325% to $553 billion.
Although Oracle’s rapid expansion puts short-term pressure on its finances, the goal is to secure long-term relationships in AI infrastructure and offer customers very competitive, stable pricing.
Oracle plans to expand its multi-cloud networking to enable high-performance, enterprise-grade connections between Oracle Cloud Infrastructure (OCI) and AWS. By connecting Oracle Interconnect and AWS Interconnect, multi-cloud customers will have a fast, private, managed link to run applications and move data easily between OCI and AWS.
Oracle reached 16 on the Data Center Magazine Top 100 list after going through major changes. The company was slow to enter the cloud computing market, and its chairman and chief technology officer, Larry Ellison, once called the idea “vigorous.”
Since then, Oracle has changed its strategy and committed to increased spending to expand its global data center presence. This investment answers the rising demand for its cloud and AI services.
Oracle designed its second-generation cloud infrastructure to meet business needs for security, performance, and cost control. This approach is now shaping the company’s financial results and reputation in the data center industry.
An Architecture for Enterprise and AI
Oracle Cloud Infrastructure (OCI) was built to handle the needs of its database customers. Its design includes bare-metal instances, which enable businesses to access hardware directly for high-performance computing. Security was a key part of the Gen Two cloud infrastructure, offering customer isolation and threat detection for regulated industries. This focus on enterprise features sets Oracle apart.
Former CEO and now Executive Vice Chair Safra Catz said, “We know better than anyone what it takes to run the full stack of technology that goes into mission-critical workloads.”
This setup also works well for AI workloads. OCI offers bare-metal GPU instances powered by NVIDIA’s Blackwell architecture and AMD’s MI300X GPUs. Its cluster networking allows fast communication between GPUs when training large language models. This was proven by a multi-year deal with OpenAI, which chose Oracle to provide computing infrastructure for its projects. Due to high demand for AI computing, many AI labs now use a multi-cloud approach for training.
A Global Construction Program
Oracle is supporting its strategy by investing heavily in physical infrastructure. The company spent about $6.9 billion in 2024 and expects to spend around US 21.2 billion in 2025. Looking ahead, Oracle plans to raise its capital spending to nearly $35 billion in 2026, mainly for data center equipment and support for its growing cloud and AI services.
Chairman and Chief Technology Officer Larry Ellison said, “We’re bringing on enormous amounts of capacity over the next 24 months,” noting one new AI facility in the United States is sized to fit eight Boeing 747s nose to tail.
Oracle’s construction projects are happening worldwide. The company plans to invest over eight billion dollars in Japan, more than six point five billion dollars in Malaysia, and three billion dollars in Germany and the Netherlands. These international projects help Oracle comply with data sovereignty laws that require data to remain within a country’s borders. Oracle’s distributed cloud portfolio supports this by letting customers run a cloud stack in their own data center or country.
Financials Underpin Oracle’s Data Center Strategy
Oracle’s investments are leading to higher revenue. In the fourth quarter of fiscal year 2025, cloud infrastructure (IaaS) revenue reached $3 billion, up by 52%. Safra expects the growth rate to rise from 50% in FY 25 to over 70% in FY 26.
One important financial measure is remaining performance obligations (RPO), which is the value of services Oracle has sold but not yet delivered. Oracle’s RPO rose from US $80 billion in Q3 2024 to US $455 billion by the first quarter of fiscal year 2026, a 359% increase from the previous year.
We expect to continue receiving large contracts to reserve cloud infrastructure and capacity because demand for our Gen2 AI infrastructure substantially exceeds supply, Safra said.
Oracle’s multi-cloud strategy is also bringing in revenue. For example, Oracle Database@Azure lets customers run Oracle databases on other cloud platforms.
Being ranked 16 on Data Center Magazine’s Top 100 list captures a specific moment in its development. While current market share reports place Oracle in the low single digits, other signs show things are changing.
Source: Oracle’s Data Centre Strategy: Cloud, AI and More Capacity
