Oracle (Oracle (ORCL)) is reportedly leading the pack in the race to build a top-secret cloud for Japan, one designed to keep Chinese hackers out and allow Tokyo to share sensitive intelligence with its allies. According to the Financial Times, the database giant is ahead of Amazon Web Services (Amazon (AMZN)), Microsoft (Microsoft (MSFT)), and Google (Alphabet (GOOGL)) in talks to provide an "air-gapped" cloud service — meaning it's physically isolated from the public internet, making it extremely hard to breach.
The U.S. has been pushing Japan for years to beef up its cybersecurity defenses against Chinese hacking. But the urgency has spiked as Washington and Tokyo deepen their weapons co-production and work on a stronger deterrence strategy against Beijing. An air-gapped cloud would let Japan store its most sensitive data securely, while potentially using commercial cloud tech for less-classified information.
Japan hasn't made a final decision yet and could still split the contract among multiple providers. The country might first build the high-security cloud for its most sensitive data, then layer in commercial cloud services for everything else. U.S. Ambassador to Japan George Glass is leading a working group that's coordinating with Oracle, its competitors, and the Japanese government.
Oracle's edge in this race comes down to two things: security and connections. The company, founded by Larry Ellison — a prominent ally of President Donald Trump — has been emphasizing its stronger security features. After a March call between Trump and Japanese Prime Minister Sanae Takaichi, Japan decided to go with a U.S.-based cloud provider, and Oracle emerged as the frontrunner.
This is a big moment for Oracle, which has been on a roller coaster lately. The company's stock had its worst month since 1990 in June, wiping out $100 billion of Ellison's fortune. The sell-off came despite strong fiscal fourth-quarter results: revenue rose 21% to $19.2 billion, cloud revenue surged 47%, and the contracted backlog hit $638 billion. The problem? Heavy AI infrastructure spending. Quarterly capital expenditures climbed to $16.49 billion, and full-year capex soared 162% to $55.7 billion, pushing free cash flow to negative $23.7 billion. Investors are worried about the cost of Oracle's AI bet, even as the revenue rolls in.
On Tuesday, Oracle also announced a new AI-native builder experience for its Oracle AI Agent Studio for Fusion Applications. The platform lets customers and partners build and deploy agentic applications within Oracle's cloud apps, supporting no-code, low-code, and pro-code development. It integrates with tools like Visual Studio Code, Git workflows, OpenAI Codex, and Claude Code — a sign that Oracle is doubling down on AI, even as the market punishes its spending.
If Oracle lands the Japan cloud contract, it could be a powerful vote of confidence — and a much-needed boost for a stock that's been battered by AI capex fears. But with Japan still weighing its options, the race isn't over yet.
