Oracle Rips
Washington state House approves millionaire tax, Anthropic launches dedicated DC arm, Replit raises $400M
Happy Wednesday.
The current thing in tech and business is Washington state House approving a 9.9% income tax on individuals who make $1M+ and Starbucks CEO Howard Shultz immediately relocating his family office from Washington to Miami.
Today’s lineup
Altimeter Partner Apoorv Agrawal at 12:00 PM
Block Executive Officer and Business Lead Owen Jennings at 12:30 PM
MoonPay Co-Founder and CEO Ivan Soto-Wright at 1:00 PM
HistoSonics Chairman and CEO Mike Blue 1:15 PM
Lux Aeterna Founder and CEO Brian Taylor at 1:30 PM
Daily Op-Ed, by John Coogan
Oracle Rips
Great Oracle earnings. Stock up 10% on the numbers, still way down from the crazy highs of last September, but lots of good news that should allay the concerns of AI bears. It’s a $470B company, not quite the almost-$1T they hit in September, but still bigger than they were this time last year.
So, total revenue is looking good. Analysts estimated $86.7B, Oracle said they’ll hit $90B for the fiscal year beginning in June. The more closely watched segment is the infrastructure business. The previous quarter showed growth of 68%, analysts predicted 79% for this quarter, but Oracle delivered 84%.
The infrastructure business is particularly important for two reasons. First, if you’re not Amazon, Microsoft, or Google, and you don’t have a massive cloud infrastructure business already, you are sort of a neo-hyperscaler. Meta and OpenAI have massive ambitions around AI, so they both signed on with Oracle to ramp up data center capacity. Oracle is an extra burst of capex capacity in the system and they are ramping. $50B in capex in the current fiscal year, and consistently outpacing analyst estimates here. In the fiscal third quarter, analysts had predicted $14B, but Oracle spent $18.5B.
The second big reason infrastructure is so important right now is that compute is still growing exponentially, even if AI adoption shows S curves in small datasets here and there. Consider consumer LLM usage. OpenAI shot up to basically a billion MAU (I think the official number is 920M WAU). But it’s slowing down, there are only 8 billion people in the world, Meta has only been able to get 3.5B using social media over a 20-year grind. Once you’re at a billion users, you can’t 10x from there. But you can still 10x compute. Easily. Token consumption on a per-user-basis exploded after reasoning models like OpenAI’s O1 showed how much better LLM answers could be with a little extra thinking (and a lot of extra compute). The same thing is happening with agents. OpenClaw and coding agents like Codex and Claude Code are in that early part of the S curve for adoption, but they are already 10xing token generation and melting GPU fleets, according to Thibault Sottiaux on the Codex team.
There was some viral bear posting about how Oracle was in financial trouble because of the economics of their infrastructure bets. Naturally, they have to buy GPUs before they rack them and start charging customers for them. This is business 101 but people were still confused. The good news is that we have some hard data on profitability now. First, Oracle is on or ahead of schedule with 90% of capacity deliveries (that means happy customers), and second, gross margins actually improved (guidance was 30% and they hit 32%). Oracle’s AI infrastructure is profitable from the moment it comes online, and they are increasing their backlog of RPO (remaining performance obligations). It’s now at $553B.
Demand is flowing in the right direction. Companies (and consumers) are happy to pay for AI tools and LLM tokens. Labs and AI inference providers are happy to pay Oracle for infrastructure without crazy delays. This means Oracle doesn’t need to get into dangerous financial engineering territory and in some cases can get customers to pay for GPUs upfront or even “bring their own hardware.” The Project continues.
Headlines
John and Jordi featured in recent My First Million podcast
Oracle stock spikes 12% as strong Q3 earnings answer Wall Street AI build-out concerns
WA income tax clears House after 24-hour debate
Ex-Starbucks CEO Schultz Moves With Family Office to Miami
Intern Tyler releases Jeremy Giffon Simulator public beta
Replit raises $400M at $9B valuation
Axios: Anthropic ramps up D.C. presence
Ramp Economics Lab’s Ara Kharazian: “I've seen enough. Anthropic is the new default for businesses.”
Google Completes Wiz Acquisition
NYT: ChatGPT, Other Chatbots Approved for Official Use in the Senate
George Hotz: Every minute you aren’t running 69 agents, you are falling behind
Al Jazeera: IEA agrees release of 400m barrels of oil from strategic reserves
Bloomberg: Anduril To Double Size of Space Unit With Defense Acquisition
The Information: OpenAI Plans to Launch Sora Video AI in ChatGPT in Strategy Shift
WSJ: Deleted Tweet From Energy Secretary Sends Oil Markets on Another Wild Ride
Bloomberg: Meta Veteran and Sequoia Partner Aim to Raise Over $1 Billion for New Firm
The Information: Quince Confirms New Funding Valuing Company Over $10 Billion
Bloomberg: The Former Academic Guiding OpenAI’s Trillion-Dollar AI Buildout
NY Post: LAX bosses approve steep fee hike on rideshare companies to curb airport congestion
FT: Nvidia strikes $2bn deal with AI cloud provider Nebius
Axios: Behind the Curtain: America’s big lie
NYT: Ari Emanuel Made His Name as a Talent Agent. Now He’s the Talent
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