OpenAI has agreed to pay Oracle $30 billion every year, here's why

OpenAI

OpenAI has been revealed as the company behind Oracle’s massive $30 billion-per-year cloud services deal, originally disclosed in a regulatory filing on June 30. The Wall Street Journal reported the customer’s identity on Monday, and OpenAI CEO Sam Altman later confirmed the partnership publicly on X and in a company blog post, though he did not comment on the deal’s value.

Oracle’s SEC filing last month triggered a flurry of speculation due to the unprecedented size of the deal, which briefly propelled Oracle’s stock to record highs. Bloomberg noted that the spike made Oracle co-founder and CTO Larry Ellison the world’s second-richest individual at the time.

The $30 billion agreement is linked to Stargate, a $500 billion data centre project being developed by OpenAI, Oracle, and SoftBank. However, according to The Wall Street Journal, this specific deal does not involve SoftBank. It covers 4.5 gigawatts of capacity — the equivalent of two Hoover Dams — and could power roughly four million homes.

The new data centre, dubbed Stargate I, is set to be built in Abilene, Texas. While it’s a major win on paper for Oracle, it also brings significant financial and logistical challenges. OpenAI and Oracle must still construct the facility, which will require substantial investment and power.

In its last fiscal year, Oracle spent $21.2 billion on capital expenditures, mostly directed toward data centre expansion. CEO Safra Catz stated in June that the company plans to spend another $25 billion this year, not including land purchases. These investments will serve not just OpenAI but also Oracle’s wider customer base.

The scale of the commitment raises eyebrows considering OpenAI’s current financials. In June, Altman said the company had crossed $10 billion in annual recurring revenue, nearly doubling from $5.5 billion the previous year. The Oracle deal alone is three times that revenue figure and does not account for OpenAI’s other infrastructure or operating costs.