Oracle Shares Decline Amid Concerns Over AI Capital Spending

Oracle shares fell 11% following the company’s fiscal fourth-quarter earnings report, which included an announcement of a $20 billion capital raise [1]. While the company reported strong cloud growth, investors reacted to the ongoing reliance on external financing to support a massive artificial intelligence infrastructure buildout [1].

Key takeaways

• Oracle announced a $20 billion net-new capital raise to supplement previously disclosed equity plans [1].
• The company reported $19.2 billion in revenue for fiscal Q4, with cloud revenue increasing 47% year-on-year [1].
• Total debt reached $162 billion as of the third quarter, leading to concerns regarding the company’s debt-to-equity ratio [1].
• Analysts remain divided, with some citing strong cloud momentum while others warn that Oracle is effectively cash-flow negative after capital expenditures [1, 2].

Financing the AI Infrastructure Buildout

Oracle’s financial strategy has come under scrutiny as the company continues to fund its expansion through a mix of debt and equity [1]. In fiscal year 2026, the company raised $43 billion in debt and $5 billion in equity, while spending $56 billion on capital expenditures [1]. For fiscal year 2027, Oracle has forecasted $70 billion in net capital outlays [1]. To support this, the company plans to raise approximately $40 billion in total through debt and equity markets [1].

This reliance on external capital has caused the company’s debt to grow significantly from $60 billion six years ago to $162 billion as of the third quarter [1]. Some analysts have expressed concern that this high leverage, combined with an Altman Z-score in the "grey zone," leaves the company with little financial cushion if AI demand cools or interest rates rise [1]. The company’s growth is heavily tied to large-scale contracts, including a reported $300 billion, five-year agreement with OpenAI [1].

Diverging Analyst Perspectives

Despite the market reaction, some analysts maintain a positive long-term outlook on Oracle’s growth trajectory [2]. UBS recently raised its price target for the stock to $285, citing feedback from customers and contractors that suggests Oracle’s AI data center projects remain on schedule [2]. UBS analysts argue that the company’s momentum in the cloud sector is intact and that it may be able to offset some cost pressures through operational savings [2].

Conversely, other analysts suggest that capital expenditure requirements could be higher than current consensus estimates [2]. Scotiabank analyst Patrick Colville has estimated that Oracle could spend nearly $100 billion in fiscal year 2027, driven in part by hardware inflation [2]. While some believe this spending is necessary to support cloud growth, others warn that if Oracle cannot convert its $638 billion in remaining performance obligations into cash quickly, the company may face further dilution or expensive refinancing [1].