Oracle Corp (NYSE:ORCL, ETR:ORC) is reportedly experiencing thin gross profit margins on its business renting Nvidia Corp (NASDAQ:NVDA, ETR:NVD) chips to customers, with internal documents showing a margin of roughly 14% on $900 million in revenue for the three months ending August 2025.
This figure is far below Oracle’s overall gross margin of about 70%, highlighting the high costs associated with Nvidia chips and the operational expenses of running large-scale AI data centers, including labor, power, and depreciation.
The documents, reported by The Information, indicate that Oracle’s AI cloud segment is struggling with profitability, with margins ranging from under 10% to just above 20%, averaging around 14% to 16%.
The company is reportedly taking significant losses when renting newer and older Nvidia chip models in limited quantities, raising concerns about the sustainability of its AI cloud business.
Despite these challenges, Nvidia CEO Jensen Huang suggested that short-term margin pressures are expected with new chip deployments.
Speaking at the CNBC Investing Club's Monthly Meeting at the New York Stock Exchange, Huang said that over time, these systems and operations “will be wonderfully profitable.”
He highlighted the complexity of building and operating massive AI data centers, noting that “when you first ramp up a new, there’s the possibility that it might not make money, but over the life of the system, they’ll be wonderfully profitable.”
Shares of Oracle fell as much as 7% on Tuesday following the report but recovered slightly in early trade on Wednesday, up 1.8% at about $290.