IBM vs Oracle

IBM was founded in 1911 as the Computing-Tabulating-Recording Company through the merger of four businesses making punch card tabulators, time recording equipment, and weighing scales. Thomas J. Watson Sr. took over as general manager in 1914 and renamed the company International Business Machines in 1924. Watson's management philosophy — "Think" was the company motto, displayed throughout IBM offices — and his aggressive sales culture built IBM into the dominant supplier of business machines in the United States.

IBM launched the System/360 in April 1964 — a family of compatible mainframe computers that could run the same software regardless of size. The development cost $5 billion — more than the Manhattan Project adjusted for inflation — and was the largest privately funded commercial project in history at the time. The System/360 established the concept of a computer family with compatible software across different hardware configurations. IBM's revenues doubled in the five years following the launch.

IBM launched the IBM Personal Computer in August 1981, choosing to build it from off-the-shelf components and license the operating system from Microsoft rather than developing proprietary technology. IBM's open architecture allowed other manufacturers to clone the design legally. Within years, IBM-compatible PCs from Compaq, Dell, and dozens of others dominated the market — running Microsoft's operating system. IBM had created the personal computer industry and handed its most valuable components to its competitors.

By 1993, IBM was losing $8 billion per year — the largest annual loss in corporate history at the time. The board hired Lou Gerstner — a former McKinsey consultant who knew nothing about technology — as CEO. Gerstner cancelled a planned breakup of the company, refocused IBM on services rather than hardware, and transformed it from a struggling computer manufacturer into a technology consulting giant. IBM's stock rose 800% during his nine-year tenure.

IBM reported revenues of approximately $62 billion for fiscal year 2024, with its software segment — including Red Hat, acquired for $34 billion in 2019 — driving growth. The company had divested its managed infrastructure services business (renamed Kyndryl) in 2021 to focus on hybrid cloud and AI consulting. IBM Watson Health, the medical AI platform launched with great fanfare after Jeopardy!, had been sold in 2022 after failing to commercialise its capabilities. IBM had again identified an AI inflection point and was competing aggressively for enterprise AI consulting work — this time through its WatsonX platform — against Accenture, Deloitte, and the hyperscalers themselves. The company that had nearly gone bankrupt in 1993 was still fighting for relevance in the industry it had created.

Larry Ellison co-founded Oracle in 1977, naming it after a CIA database project he had worked on. Ellison had dropped out of two universities without completing a degree. He was 33 when he founded the company with Bob Miner and Ed Oates, investing $2,000 of his own money. His original goal was to build a relational database based on a paper published by IBM researcher Edgar Codd — a paper IBM itself had no plans to commercialise. The irony that the company named after a CIA project would end up housing the world's most powerful AI infrastructure was still decades away.

Oracle went public in 1986 and grew explosively. By 1990, it was the second largest software company in the world after Microsoft. Then the company was forced to restate earnings after sales staff had been booking revenue from contracts customers had not yet signed. The stock fell 80%. Oracle nearly went bankrupt. Ellison later said it was the moment he learned that a company's culture reflects its leader.

Oracle launched a hostile takeover bid for rival PeopleSoft in 2003 — an 18-month battle during which PeopleSoft's CEO publicly called Ellison a "sociopath." Oracle eventually prevailed for $10.3 billion. It was the beginning of an acquisition machine: over 100 companies bought in the following decade, workforces cut, software integrated into Oracle's sales engine. The strategy made Oracle dominant in enterprise software and deeply unpopular with the companies it absorbed.

Oracle signed one of the most consequential deals in its history in 2025: a partnership with OpenAI as the anchor cloud provider for the Stargate project — a $500 billion AI infrastructure initiative backed by SoftBank. Oracle committed to building data centres at a scale previously associated only with nation-states: over 5 gigawatts of AI capacity, running more than 2 million chips. Oracle's remaining performance obligations — contracted future revenue — surged 438% year-over-year to $523 billion. By June 2026, full-year cloud revenue was $34 billion, growing 39%.

Oracle reported record fiscal year 2026 results in June 2026: total revenue of $67.4 billion, up 17%, with cloud infrastructure revenue growing 77% to $18.1 billion. CEO Safra Catz projected OCI — Oracle Cloud Infrastructure — would hit $144 billion by 2030. Larry Ellison, then 81, had personally negotiated the Stargate deal and was briefly the second-richest person in the world when Oracle's stock surged 36% in a single day following the Q1 2026 earnings announcement. The database company that had been called a legacy software giant was now the primary landlord of the AI revolution.