Oracle Faces Power Hurdles in New Mexico Data Center Push
Oracle is using fuel cells to keep its New Mexico AI data center project moving after state officials denied critical gas pipeline permits, even as the company reports strong quarterly financial results.
Oracle Corp. is proceeding with its artificial intelligence data center expansion in New Mexico despite regulatory setbacks. State authorities denied energy permits for a natural gas pipeline, pushing the project's operational start to February 2027. This delay affects a major initiative developed with OpenAI under the Stargate program.
To maintain construction schedules, the company has shifted to on-site fuel cells for immediate power generation. Co-CEO Clay Magouyrk stated that the infrastructure build-out remains on track. This move allows Oracle to continue site preparation without waiting for the gas supply, ensuring the project progresses in phases to manage financial impacts.
Fuel Cells Replace Stalled Gas Pipeline
The primary obstacle was the denial of permits by the New Mexico State Land Office. Instead of halting work, Oracle partnered with Bloom Energy Corp. to deploy fuel cells. Magouyrk described this solution as environmentally favorable compared to waiting for the gas infrastructure. The technology provides a bridge to keep the facility active while long-term energy solutions are finalized.
Executives emphasized that such delays are common in large-scale construction. Magouyrk noted that expecting every deliverable to happen on the first attempt is unrealistic. By using fuel cells, the company avoids a total stoppage. This approach allows the team to meet construction milestones while navigating the bureaucratic hurdles of state energy regulations.
Financial Results Exceed Market Expectations
Despite the operational friction in New Mexico, Oracle reported stronger-than-expected financial performance. First-quarter earnings came in at $1.92 per share, beating the estimated $1.74. Revenue reached $19.35 billion, also surpassing the forecast of $19.14 billion. The company has raised its full-year adjusted EPS guidance to $8.10 and projects total revenue to exceed $90 billion.
Oracle also clarified its status in Texas. The company denied reports that its Abilene expansion with OpenAI had been paused due to chip preferences. Management called those claims false and incorrect. The focus remains on delivering infrastructure capacity, even if the path to full operation involves temporary workarounds for power supply.
Strategic Phasing Mitigates Revenue Risk
The company is deploying facilities in phases to prevent concentrated revenue impacts in a single quarter. This strategy helps smooth out the financial effects of any delays. By spreading out the activation of new capacity, Oracle aims to maintain steady growth. The reliance on fuel cells is a tactical move to keep the timeline intact despite the permit issues.
The situation highlights the complexities of scaling AI infrastructure. While the financials are robust, the physical build-out faces real-world constraints. The transition to fuel cells serves as a temporary solution. It allows the company to respect its construction deadlines while it works through the regulatory process for long-term energy access.
