Oracle Corporation (ORCL.US) won a nearly $7 billion, ten-year software contract from the U.S. Department of Defense.

The U.S. Department of Defense announced on Thursday that it has signed an enterprise software agreement with software giant Oracle Corporation (ORCL.US) worth nearly $7 billion for up to 10 years. Encouraged by this news, Oracle Corporation's stock price rose by around 3% in after-hours trading. The contract, named the "Enterprise Software Agreement," was negotiated by the U.S. Navy and aims to consolidate the dispersed local software licenses of various departments of the U.S. Department of Defense, the U.S. Coast Guard, and the intelligence community into a single contract. The agreement has a base period of 5 years with an option for a 5-year extension, covering perpetual and subscription software licenses, maintenance, and consulting services. The Chief Information Officer of the U.S. Department of Defense, Dana Deasy, stated in a declaration, "By fundamentally improving the way we acquire Oracle Corporation's on-premises capabilities, we have saved taxpayers at least $441 million, while being able to rapidly and effectively serve our warfighters." It is worth mentioning that the Central Intelligence Agency is Oracle Corporation's first customer. This agreement with Oracle Corporation is the latest initiative led by Deasy to reduce redundant software expenses at the Department of Defense and promote enterprise-wide unified procurement. In May of this year, his office reached a similar agreement with Microsoft Corporation (MSFT.US) worth $9.69 billion over five years, integrating the various Microsoft Corporation and other enterprise software licenses of the military branches and intelligence agencies into a single contract to end the years-long disjointed procurement model. This substantial deal also provides important government business endorsement for Oracle Corporation. Co-founder of Oracle Corporation, Larry Ellison, has a close relationship with U.S. President Trump, having donated $45 million to a nonprofit organization supporting Trump's 2024 re-election campaign. During Trump's second term, Ellison was one of the first guests to visit the White House and announced the "Stargate" artificial intelligence (AI) data center plan; Trump also supported Oracle Corporation's acquisition of a stake in TikTok's U.S. business. In May of this year, the U.S. Department of Defense announced agreements with Oracle Corporation and other tech companies regarding the deployment of AI on sensitive networks. Despite winning a major defense contract, Oracle Corporation is still facing market pressure this year. Due to investors' concerns about the rise of AI potentially impacting the growth prospects of traditional software companies, Oracle Corporation's stock price has fallen by 38% so far this year. To compete in the AI computing market, the company is constructing AI data centers on a large scale burdened by billions of dollars in debt. Financially, Oracle Corporation's quarterly data released in June showed a 2% year-on-year decline in software revenue, but an increase of 47% in cloud revenue, benefiting from providing AI computing power to clients like OpenAI.