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FinancePentagon signs 10-year software contract with Oracle worth up to $7 billion
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The Pentagon announced a 10-year contract with Oracle worth up to $7 billion to supply on-premises software to the U.S. Department of Defense, including branches of the military, the intelligence community, and the Coast Guard. The contract is expected to save taxpayers at least $441 million. Oracle co-founder Larry Ellison, a longtime supporter of President Donald Trump, was among the first guests at the White House in Trump's second term. Despite this win, Oracle shares are down 38% this year due to investor concerns that AI could hurt software incumbents and the company's heavy debt for AI data center buildout. The company reported a 2% decline in quarterly software revenue but a 47% increase in cloud revenue.
Source report
The Pentagon on Thursday announced a contract with Oracle worth nearly $7 billion over a decade, marking a significant win for the software maker, which has faced investor pressure this year. Oracle shares rose approximately 3% in extended trading.
Contract Details
- Oracle will supply on-premises software to the U.S. Department of Defense over 10 years in a contract valued at up to $7 billion.
- The agreement covers Oracle software in on-premises data centers for branches of the military, the U.S. intelligence community, and the Coast Guard.
- The Central Intelligence Agency was Oracle's first customer.
Kirsten Davies, the Department of Defense's chief information officer, stated in the release that the agency is saving at least $441 million for taxpayers "by fundamentally improving how we procure on-premises Oracle capabilities."
Broader Context
Earlier this week, Defense Secretary Pete Hegseth estimated that the war in Iran, which began in February, has cost the U.S. $37.5 billion.
Oracle co-founder Larry Ellison has long been a supporter of President Donald Trump, reportedly contributing $45 million to a nonprofit backing Trump's 2024 presidential campaign.
Ellison was among the first guests to appear at the White House during Trump's second term, announcing plans for Stargate artificial intelligence data centers in the U.S. Trump supported Oracle taking a stake in TikTok's U.S. business. In May, the Defense Department announced agreements with Oracle and other tech companies around AI deployments in classified networks.
From left, President Donald Trump, Oracle's Larry Ellison, SoftBank's Masayoshi Son, and OpenAI's Sam Altman appear at the White House in Washington on January 21, 2025. Jim Watson | AFP | Getty Images
Market Performance and Challenges
Despite the contract win, Oracle shares are down 38% this year, as investors have grown concerned that AI could hurt growth prospects for software incumbents. The company is also accumulating tens of billions of dollars in debt to build out AI data centers.
Oracle said in June that quarterly software revenue declined 2% from a year earlier, though the company's database software remains widely used inside large companies. Cloud revenue climbed 47% as the company accelerates efforts to supply AI computing power to OpenAI and other clients.
WATCH: Oracle reportedly facing cost overruns
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Oracle signs 10-year software contract with Pentagon worth up to $7 billion