Ellison Tops Musk as World’s Richest Man After $101 Billion Gain

 Long-standing corporate titans aren’t supposed to add over $200 billion to their market value in a single day. Yet 48-year-old Oracle (ORCL.N), opens new tab has done just that. While today’s results, revealed in quarterly earnings released Wednesday, opens new tab, are run-of-the-mill, the company’s near future is wildly exciting, its revenue backlog more than tripling to $455 billion. Investors assuming that investments needed to satisfy this demand will generate attractive and sustainable returns are counting AI chickens before they hatch.

Oracle’s market value, now approaching $1 trillion, is all about tomorrow. Annual sales growth of 12% disappointed, while earnings per share declined. Yet the company projected that cloud infrastructure revenue of $18 billion this fiscal year will climb to an astonishing $144 billion over the following four years.

That’s thanks to seemingly insatiable demand from the likes of OpenAI and Meta Platforms (META.O), opens new tab. Serving their needs, however, requires a lot of investment. Already-heavy capital expenditure jumped well above expectations, more than tripling in the quarter to $8.5 billion. Oracle will spend some $35 billion this fiscal year. While analysts foresee the return on all this invested capital falling by about a third compared to historic levels, that would leave it at roughly 20%, which is attractive at such a gigantic scale.

Co-founder Larry Ellison has key advantages. Oracle’s business stitching together various cloud services has drawn Amazon.com (AMZN.O), opens new tab, Alphabet-owned Google (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab. Revenue from these firms rose over 1,500% in the quarter. Most big companies already run on Oracle databases, making it easier to combine gear and software. This unit also doesn’t require as many resources as land-hungry new-build data centers.

Yet lashing its fate to Amazon or Google may leave Oracle at the whims of giants, using it as a temporary expedient to control their own ramped-up investment spending. It is taking greater risks than its customers: Oracle is burning cash, while Microsoft is predicted to have $75 billion of free cash flow this calendar year, according to LSEG data.

Nonetheless, in the always-tomorrow, never-today world of AI, all this spending is simply taken as a guarantor of incoming business. On Thursday morning, Oracle shares leaped over 30%. They were already trading at 34 times estimated earnings over the next year, more than doubling their ten-year average.

None of these accounts for the danger that the revenue backlog shrinks if AI buildout efforts diminish or fail. Massive investment across the sector could put pressure on pricing, and the vast inventory of equipment that the company holds includes bleeding-edge tech that typically depreciates at warp speed. Continuing to wring chunky returns out of such a massively expanded capital base is a challenge entirely unlike Big Tech’s software-oriented past. Their investors, though, are using the same trust-the-plan playbook they always have.

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 Larry Ellison has become the world’s richest person for the first time, ending Elon Musk’s nearly year-long reign in the top spot.

Ellison’s fortune soared $101 billion as of 10:10 a.m. in New York after Oracle Corp. reported quarterly results that surpassOracle’s Big Deals With OpenAI, Nvidia Fuel Cloud Turnaround ed expectations and said there’s more growth to come.

The increase lifted his total fortune to $393 billion, ahead of Musk, who sits at $385 billion, according to the Bloomberg Billionaires Index. It’s the biggest one-day increase ever recorded by the index.

Musk became the world’s richest person for the first time in 2021 before losing the title to Amazon.com Inc.’s Jeff Bezos and LVMH’s Bernard Arnault. He reclaimed it last year and had held it for just over 300 days.

Ellison, 81, who co-founded Oracle and is now chairman and chief technology officer, has the bulk of his net worth tied up in the database software company.

Oracle’s shares, which had already gained 45% this year through Tuesday’s close, soared 41% Wednesday after the company posted a major increase in bookings and gave an aggressive outlook for its cloud infrastructure business. It’s the company’s largest single-day surge ever.

Shares of Tesla Inc., by contrast, are down 13% this year. The company’s board has proposed a massive pay package for Musk that, if he succeeds in meeting a series of ambitious targets, could make him the world’s first trillionaire.