The success of Oracle AI is great news for IBM

Oracle (ORCL 11.44%) lost the battle for general purpose cloud computing Amazon Web Services and Microsoft Azure, but a different story plays out in artificial intelligence (AI) cloud infrastructure. Oracle builds cloud data centers equipped with Nvidia graphics processing units (GPUs) at a rapid pace and earning billions of dollars in business from AI companies.

Oracle now has 162 cloud data centers either operating or under construction globally. The company signed $3 billion in cloud GPU contracts in the first quarter of fiscal 2025, which ended Aug. 31. Demand for Oracle’s cloud GPUs drove total cloud infrastructure revenue up 45% year over year in the first quarter to $2.2 billion.

Oracle’s aggressiveness to pursue AI customers is paying off. International Business Machines (IBM 0.88%)which competes with Oracle in several areas, also benefits from the success of Oracle AI.

Expanding Oracle’s consulting business

IBM sells solutions for the company’s customers. The company’s consulting arm does not have its hands tied when it comes to recommending competitors’ products. IBM has strategic partnerships with major technology companies, including Oracle, AWS, Microsoft, SAPand others. These partnerships bring billions of dollars worth of business to IBM.

In recent days, IBM has made two announcements that will help the company tap into growing demand for Oracle’s AI-related services. First, the company announced on Monday its intention to acquire Oracle services provider Accelalpha.

Accelalpha consultants specialize in helping customers implement and manage Oracle solutions. Once the deal closes, they will join IBM’s consulting business and strengthen the company’s Oracle-related capabilities.

Second, IBM announced on Tuesday that it has expanded its network of certified consultants in Oracle core technologies. These consultants can help customers deploy generative AI workloads on Oracle infrastructure and are also trained on the IBM watsonx AI platform.

Consulting is key to IBM’s AI strategy

Since launching its watsonx AI platform last year, IBM has generated more than $2 billion worth of business related to generative AI. A whopping three-quarters of that business was in the form of consulting signings. This should give you an idea of ​​how important IBM’s consulting business is to IBM’s overall AI business.

While the demand for AI infrastructure is booming, so is the demand for expertise, guidance and implementation services related to the new technology. AI companies deploy workloads across multiple public clouds, and through partnerships and specialized consulting services, IBM meets these customers where they are.

IBM’s AI story may seem less interesting than Oracle’s. While Oracle is building massive data centers and buying lots of powerful GPUs, IBM is working behind the scenes to help enterprises understand the AI ​​era and use the technology to increase efficiency. Partnerships are at the center of attention.

As Oracle continues to build out its cloud infrastructure and attract customers looking to train and deploy advanced AI models, IBM (and its consulting approach) stands to gain. The company is on track to generate more than $12 billion in free cash flow this year, and that number could grow in 2025 as its generative AI business takes off. With a price-to-free cash flow ratio of around 15, IBM looks like a solid AI value.