Cloudflare and Oracle Partner on Enhanced Cloud and AI Infrastructure

Cloudflare and Oracle Announce Expanded Cloud Integration

On October 13, 2025, Cloudflare, Inc. (NYSE: NET), a leading connectivity cloud provider, announced the native availability of its connectivity cloud platform on Oracle Cloud Infrastructure (OCI) worldwide. This strategic integration aims to provide joint customers with enhanced security, performance, and resiliency across hybrid, multicloud, and OCI-hosted applications, with a particular emphasis on supporting demanding AI workloads. The move comes as a Forrester Research report highlights that 73% of enterprise networking infrastructure decision-makers are already adopting multicloud networking solutions.

Strategic Rationale and Operational Benefits

The partnership deepens a prior collaboration, building on Oracle's participation in Cloudflare's Bandwidth Alliance, which eliminates egress charges for data transferred from OCI Object Storage. This elimination of data transfer fees, coupled with OCI's competitive networking pricing, represents a significant financial incentive designed to reduce operational costs for enterprises, counteracting high transfer rates often associated with other cloud providers. By offering a more cost-efficient and high-performance solution, this native availability is expected to bolster OCI's competitive position against major hyperscale rivals such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.

Cloudflare's Chief Partner Officer, Tom Evans, underscored the evolving threat landscape driven by AI, stating:

"We all see how AI is transforming the way organizations and their employees operate, and we need to pay equal attention to how AI is expanding our threat landscapes. Organizations need a comprehensive platform that delivers flexibility, performance, and security. Our integration with Oracle Cloud Infrastructure will help ensure businesses everywhere, across any cloud environment, can run their workloads on a unified platform with security and speed at the forefront."

David Hicks, Group Vice President, ISV Ecosystem, Oracle North America, reiterated Oracle's commitment to secure and scalable workloads, noting:

"Through our partnership with Cloudflare, we will enable organizations to protect cloud and AI workloads while enhancing resilience and performance across hybrid and multicloud."

Cloudflare's Financial Performance Amidst Partnership

Cloudflare (NET) reported robust financial results for its second quarter ended June 30, 2025. The company announced earnings per share (EPS) of $0.21, exceeding analyst estimates of $0.18. Revenue reached $512.32 million, surpassing the consensus estimate of $501.58 million and marking a 27.8% year-over-year increase. Despite strong revenue growth, Cloudflare reported a negative net margin of 6.22% and a negative return on equity of 8.42% for the period. The company has set its fiscal year 2025 guidance at $0.850-$0.860 EPS. On October 7, 2025, Cloudflare's stock experienced a decline of 2.5%, reflecting broader market anxieties related to AI demand and profitability concerns across the sector.

Oracle's Financials and AI Cloud Profitability Scrutiny

Oracle (ORCL) also released its fiscal 2025 fourth-quarter and full-year results on June 11, 2025. Total quarterly revenues advanced 11% year-over-year to $15.9 billion. Cloud services and license support revenues rose 14% to $11.7 billion, with Cloud Infrastructure (IaaS) revenue demonstrating significant growth, increasing 52% to $3.0 billion. For the full fiscal year 2025, total revenues climbed 8% to $57.4 billion. Oracle projects its total cloud growth rate to accelerate from 24% in FY25 to over 40% in FY26, with Cloud Infrastructure growth expected to jump from 50% to over 70% in FY26.

However, Oracle's AI cloud segment has recently faced scrutiny regarding its profitability. Reports on October 7, 2025, indicated that Oracle's AI cloud business, primarily driven by renting Nvidia-powered servers, operated with a "meager 14% gross profit margin" for the three months ending August 2025. This contrasts sharply with the approximately 70% gross margins typically observed in Oracle's traditional software business. This news contributed to a 7.1% downturn in Oracle's shares on the NYSE on the same day. Further details on strategies to improve AI cloud margins are anticipated at Oracle's upcoming Financial Analyst Day on October 16, 2025.

Broader Market Context and Competitive Landscape

The integration of Cloudflare's platform on OCI signals a strategic maneuver to secure a larger share of the expanding multicloud and AI workload markets. The U.S. cloud computing market is a significant growth engine, with the global cloud services market reaching approximately $330.4 billion in 2024. Enterprise spending on cloud infrastructure services hit $94 billion in the first quarter of 2025, marking a 23% year-over-year increase. Market forecasts project a sustained compound annual growth rate (CAGR) between 16% and 21% through the end of the decade, largely propelled by the widespread adoption of Generative AI.

The market remains concentrated among the "Big Three" hyperscalers. In Q1 2025, AWS led with 29% of the global IaaS and PaaS market share, followed by Microsoft Azure with 22%, and Google Cloud with 12%. Together, these three account for 63% of all enterprise spending. These major providers are aggressively investing in infrastructure and strategic alliances, particularly for AI. For instance, Amazon's 2024 10-K filing indicated cash capital expenditures of $77.7 billion primarily for AWS growth, with further increases expected in 2025. Similarly, Google plans to spend about $75 billion on capital expenditures in a single year, largely to power its AI ambitions. This aggressive spending underscores the belief that infrastructure capacity for AI will be a key competitive differentiator, even as profitability concerns for AI-specific services begin to surface.

Analyst Commentary and Future Outlook

While the Cloudflare-Oracle integration is viewed positively for its potential to enhance multicloud security and performance, especially for AI, the broader market implications are tempered by the significant capital investment and operational costs associated with scaling AI capabilities. The disclosed lower gross margins in Oracle's AI cloud segment highlight these challenges, which could influence investor sentiment across the AI and cloud sectors. Investors will closely monitor Oracle's Financial Analyst Day for insights into their strategy to improve AI cloud profitability. The long-term outlook for Cloudflare projects $3.8 billion in revenue and $176.4 million in earnings by 2028, requiring substantial yearly growth. The sustained demand for secure, resilient cloud infrastructure and the ability of companies to manage competition and profitability in the AI era will be critical factors determining future performance.