Oracle’s AI Profits Look Slim—Are NBIS and CRWV at Risk Too?

Key Points

• A recent report suggests that Oracle is generating slim margins on its AI cloud business and losing money on NVIDIA's latest chips.
• How concerned should investors be about Oracle and "neo-cloud" stocks?
• Investors are rewarding growth big-time, but margins will be an important risk to watch for these names going forward.

Indisputably, so-called “neo-cloud” stocks have been some of the most impressive performers of 2025. This generally describes companies providing artificial intelligence (AI)-specific cloud infrastructure, particularly emerging firms like Nebius NASDAQ: NBIS and CoreWeave NASDAQ: CRWV. As of the Oct. 14 close, their shares are up roughly 362% and 235%, respectively.

Up around 81%, Oracle NYSE: ORCL doesn’t neatly fit the neo-cloud moniker; it is one of the world’s largest legacy technology companies. However, especially in 2025, the company’s focus on providing AI infrastructure has been the primary driver of its stock price. This makes it key to the neo-cloud and overall AI cloud computing discussion.

Thus, one report around the company is particularly relevant. As first reported by The Information, Oracle is struggling to turn much of a profit on renting AI servers. While generating massive growth is important, companies ultimately need to turn revenue streams into profits to create real value. Below, we’ll break down the implications of this report that investors should understand. Does it signal that neo-cloud and similar companies are in trouble? Or can these firms outgrow current profitability issues, justifying the huge gains in their share prices?

Oracle's AI Server Revenues Look Thin, But Pathways for Strong Improvement Exist

According to the report, in the three months ended in August, Oracle recorded $900 million in sales through renting out its AI servers. However, it generated only $125 million in gross profit, for a gross margin of 14%. This is much lower than the 72% overall gross profit margin the company generated in fiscal year 2025. One factor supporting the accuracy of this report is that Oracle's overall gross margin dropped by nearly 340 basis points in fiscal Q1 2026. The report also claims that Oracle lost $100 million renting out NVIDIA’s NASDAQ: NVDA latest Blackwell chips last quarter.

This report shows that as Oracle grows its cloud business, it will dilute the firm’s overall margin profile. However, given the size of the AI computing opportunity, that is not necessarily a bad thing. The company is forecasting its cloud business to grow to $144 billion by fiscal year 2030. In FY 2025, the firm generated $57.4 billion in total revenue. With a much larger revenue base, the company’s overall profits could still increase massively, even with lower margins.

Additionally, as the company’s cloud business expands, it would make sense for cloud margins to continue expanding. As utilization of the company’s cloud infrastructure rises, it can spread costs over a larger revenue base. This would help mitigate overall margin dilution. Lastly, Advanced Micro Devices' NASDAQ: AMD recent AI deals with OpenAI and Oracle position it as a more legitimate competitor to NVIDIA. This could create pricing pressure on NVIDIA, potentially allowing Oracle to buy servers at a lower cost. This is another factor that could benefit margins. However, the report does provide reason to believe that Oracle’s margins could fall faster than many expect. This makes them a key risk factor to watch at Oracle going forward.

NBIS & CRWV: Rapid Growth; But Deeply Unprofitable

When it comes to true neo-cloud names like Nebius and CoreWeave, investors have placed little attention on profitability.

These firms grew revenues by 625% and 207% last quarter, respectively.

However, Nebius generated $105 million in revenue but incurred a $111 million loss from operations.

CoreWeave generated revenues of $1.2 billion but posted a net loss of $290 million and free cash flow of -$2.7 billion.  

Still, the vast majority of Nebius’s midpoint $1 billion in annualized run-rate revenue guidance has yet to come online.

Meanwhile, CoreWeave is sitting on a $30 billion backlog.

Both firms have also continued to sign multi-billion-dollar pacts with hyperscale customers since the last reporting.

This gives these firms a significant runway to prove that they are improving profitability as they expand their infrastructure and generate more revenue.

ORCL and Neo-Cloud Rallies Could Continue

Overall, profitability should become an increasingly important concern for Oracle and neo-cloud stocks over time. However, markets are currently rewarding these names handsomely for growth, while punishing them little for losses or slim margins.

Notably, Oracle shares fell only around 2.5% on Oct. 7 when The Information released its report.

Since then, the stock has recovered those losses and moved modestly higher, suggesting investors are taking a longer-term view of the company’s AI strategy.

Given this backdrop, it’s possible that shares of these names could ride significantly higher before markets become concerned with profits.

Still, investors should stay aware of this key risk.