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AI Infrastructure · Capital Expenditure · Debt · Oracle
Oracle shares tumbled 12% on Thursday, wiping approximately $72 billion from its $578.83 billion market value, as investors reacted negatively to surging capital expenditures and a ballooning debt load associated with its aggressive AI infrastructure build-out.
Oracle, a smaller cloud player, secured major data-center deals with OpenAI and Meta to compete with Amazon and Microsoft. Unlike larger tech giants, Oracle lacks substantial cash flows, forcing it to burn cash and issue debt while its traditional software business faces pressure from AI.
Citizens JMP Securities stated Oracle’s accelerated data center build-out pressures near-term gross margins and raises investor questions around CapEx, funding, and returns. The company expects net capital expenditure of around $70 billion in its current fiscal year for AI data center development.
To fund this, Oracle will raise another $40 billion in debt and equity, including a previously announced $20 billion stock issuance, following $43 billion in debt and $5 billion in equity raised in the fiscal year ended May. Melius Research analysts question Oracle's ability to adhere to this CapEx plan and note competitors will likely not slow spending.
Oracle’s higher-than-expected capital spending for fiscal year 2026 deepened its free cash flow deficit to $23.7 billion, a significant rise from a $394 million deficit in fiscal 2025. The stock drop also weighed on the European IT sector, with SAP tumbling 4.4% and Capgemini sliding 3.6% following a UBS Global Wealth Management downgrade.
