Oracle(NYSE: ORCL) lost the battle for general-purpose cloud computing to Amazon Web Services and Microsoft Azure, but a different story is playing out in artificial intelligence (AI) cloud infrastructure. Oracle is building out cloud data centers outfitted with Nvidia graphics processing units (GPUs) at a rapid pace and winning billions of dollars in business from AI companies.
Oracle now has 162 cloud data centers either operating or being built globally. The company signed $3 billion worth of cloud GPU contracts in the first quarter of fiscal 2025, which ended on August 31. Demand for Oracle's cloud GPUs drove overall cloud infrastructure revenue up 45% year over year in the first quarter to $2.2 billion.
Oracle's aggressiveness in going after AI customers is paying off. International Business Machines(NYSE: IBM), which competes with Oracle in multiple areas, is also benefiting from Oracle's AI success.
Expanding the Oracle consulting business
IBM sells its enterprise clients solutions. The company's consulting arm doesn't have its hands tied in regards to recommending competitors' products. IBM has strategic partnerships with major technology companies, including Oracle, AWS, Microsoft, SAP, and others. These partnerships bring in billions of dollars worth of business to IBM.
In the past few days, IBM made two announcements that will help the company tap into soaring demand for Oracle's AI-related services. First, the company announced its intent to acquire Oracle services-provider Accelalpha on Monday.
Accelalpha's consultants specialize in helping clients deploy and manage Oracle solutions. Once the deal closes, they'll join IBM's consulting business and bolster the company's Oracle-related capabilities.
Second, IBM announced on Tuesday that it had expanded its network of consultants certified in core Oracle technologies. These consultants can help clients with deploying generative AI workloads on Oracle infrastructure and are also trained on IBM's own watsonx AI platform.
Consulting is the key to IBM's AI strategy
Since launching its watsonx AI platform last year, IBM has churned up more than $2 billion worth of business related to generative AI. A whopping three-quarters of that business was in the form of consulting signings. That should give you an idea of how important IBM's consulting business is to IBM's overall AI business.
While demand for AI infrastructure is booming, so is the demand for expertise, guidance, and implementation services related to the new technology. AI companies are deploying workloads across multiple public clouds, and through partnerships and specialized consulting services, IBM is meeting those customers where they are.
IBM's AI story may seem less exciting than Oracle's. While Oracle is building out massive data centers and buying up truckloads of powerful GPUs, IBM is working behind the scenes to help enterprises make sense of the AI era and leverage the technology to boost efficiency. Partnerships are front and center.
As Oracle continues to build out its cloud infrastructure and attract customers wanting to train and deploy advanced AI models, IBM (and its consulting-heavy approach) stands to benefit. The company is on track to generate more than $12 billion in free cash flow this year, and that number could grow in 2025 as the generative AI business takes off. With a price-to-free-cash-flow ratio of about 15, IBM looks like a solid AI value.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has positions in International Business Machines. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Oracle. The Motley Fool recommends International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
