Oracle (ORCL) Q3 FY26 earnings call: the analyst Q&A

Is the halo effect from AI infrastructure translating into business for traditional cloud workloads and applications? Can you provide visibility into CapEx for FY27?

Mike Sicilia confirmed a significant halo effect, citing embedded AI services in applications, OCI's cost efficiency creating budget for transformations, and the strength of sovereign AI offerings. Doug Kehring stated FY27 CapEx guidance would come after the fiscal year-end, highlighting the uncoupling of CapEx from Oracle's capital requirements due to new funding mechanisms.

“Yes, we absolutely are seeing a halo effect, and let me add a little bit of color on that. As far as the apps business, the fact that we're training so many models on OCI and so closely provisioned to our applications allows us to embed very high-quality AI services right into our applications, as I said, as features.”

asked by John DiFucci · answered by Mike Sicilia

As Oracle moves towards higher AI inferencing, what is the strategy for optimizing data center locations, especially given current large centralized locations far from population centers?

Clay Magouyrk explained that inferencing demand is rapidly growing. He clarified that while latency is a factor, the primary latency problem is currently the hardware architecture, not data center location. This flexibility allows Oracle to place data centers where power and land are abundant, optimizing for cost and availability, with sovereignty also being a key consideration.

“If what you're doing is you're asking a question for your business, it's going to take an AI model several seconds to think about, an extra 40 milliseconds of latency from New York to Wyoming is not going to hurt you.”

asked by Mark Murphy · answered by Clay Magouyrk

What is the customer demand for training private data and building private LLMs, and how confident is Oracle in the inflection of AI Database growth?

Clay Magouyrk noted that while specific training of private LLMs is less common, combining best models with private data is highly popular. Oracle's AI Database and AI Data Platform facilitate this by providing functionality for vector embeddings and access to various models. He emphasized that customers need to move their most important private data to the cloud to leverage the latest AI, driving Multicloud Database growth.

“Instead, what I think is incredibly popular and growing in popularity is people taking the best models and wanting them to combine that in a private way with their private data.”

asked by Sitikantha Panigrahi · answered by Clay Magouyrk

How comfortable is Oracle with the value creation and profitability of its AI data center business, considering the cost of building and financing? How does Oracle parlay its AI data center business into being the AI provider for sovereign clouds?

Clay Magouyrk stated that AI data center gross margins are 30-40%, improving with efficiency. Adjacent services (10-20% of spend) and higher-margin Multicloud Database (60-80% margins) further boost overall OCI profitability. Mike Sicilia explained that sovereignty now encompasses data, operations, and contracting, with Oracle's Alloy model delivering full-stack OCI and applications in sovereign zones, offering unique flexibility.

“The other thing to understand is that in these AI data centers, whether it be for inferencing or for training workloads, only thing being procured is not AI accelerators. There's a lot of general purpose compute.”

asked by Mark Moerdler · answered by Clay Magouyrk

What is Oracle's perspective on the 'SaaS apocalypse' thesis, where AI is expected to kill application software, and what are customers saying?

Mike Sicilia dismissed the 'SaaS apocalypse' for Oracle, stating customers are not replacing mission-critical systems with niche AI features. Instead, they seek to consume AI embedded directly into Oracle's applications. He emphasized Oracle's role as a disruptor by integrating AI agents (1,000+ in Fusion, hundreds in banking suite) into its comprehensive, regulatory-compliant SaaS offerings, enhancing their market position.

“I've not yet met a customer who tells me they're ready to give away their retail merchandising system, their core banking system, demand deposit account systems, electronic health record systems and some cobbling together of niche AI features is going to replace all of that over overnight.”

asked by Raimo Lenschow · answered by Mike Sicilia

With the introduction of AI Agent Studio in Fusion, how does Oracle's role evolve in a world where many players vie to be the AI interaction layer across enterprise systems?

Mike Sicilia highlighted that data gravity matters, especially for mission-critical data within Fusion. The AI Agent Studio allows building agents across Fusion, industry, and third-party applications, providing a standard, upgraded platform for customers to create custom agents close to their most relevant data. Larry Ellison added that Oracle provides prebuilt agents and a complete integrated development environment (AI Data Platform) for customers and partners to build their own agents using any popular AI model, automating entire ecosystems like healthcare and financial services.

“What the AI Data Platform does is it provides a complete integrated development environment where you can build your own agents using any AI model that is in the Oracle Cloud and that is basically all of the popular AI models.”

asked by Brad Zelnick · answered by Mike Sicilia