Oracle tells investors not to worry about data center spending because its 'very, very good' at cost-cutting
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- Oracle reported its third-quarter earnings for fiscal 2026 on Tuesday.
- The cloud giant is forecasting $50 billion in capital expenditures for the year.
- To maximize profit, Oracle is focused on cutting costs and accelerating construction timelines.
Oracle has two magic words for investors concerned with the company's aggressive data center spending: fast and cheap.
Shares of the cloud giant rose as much as 10% on Tuesday after it surpassed investor expectations for the third quarter and raised revenue guidance to $67 billion for fiscal 2026.
Still, Oracle faced some questions about its AI data center buildout and how it plans to justify the billions of dollars it burns along the way. In February, Oracle announced a $50 billion debt raise to help fund its AI ambitions. In the last year, the company has announced major data center projects in Texas, New Mexico, and Michigan.
On Oracle's third-quarter earnings call Tuesday, Bernstein analyst Mark Moerdler asked, "How comfortable are you with the values you're creating from the AI data center business itself?"
Oracle co-CEO Clay Magouyrk reassured Moerdler that the company is focused on minimizing the cost of its data center buildout to maximize future profitability.
"We continue to get better and better at running these data centers, delivering them more cheaply, optimizing the amount of cost for networking and hardware spend, as well as power," said Magouyrk.
He added that Oracle is focused on accelerating the time its buildings spend under construction.
"We're very good at it," he said.
"We're very, very good at reducing those costs during that time period."
He did not give any other details on how exactly Oracle manages its data center budget.
In 2022, Oracle undertook significant cost-cutting measures, laying off thousands of people in the wake of its $28 billion acquisition of medical records giant Cerner.
In January, Business Insider reported that Oracle was struggling to find financing for Stargate, its $500 billion data center initiative with OpenAI.
Lenders and investors told Business Insider they were growing weary of the project's lofty ambitions as it races to keep up with the rest of Big Tech amid the AI race.
Amazon, Microsoft, Google, and Meta are on track to spend $600 billion on data centers and AI infrastructure in 2026 alone.