Oracle Shares Drop as Massive AI Spending and Debt-Financing Plans Raise Investor Concerns

Oracle shares fell 8.9% in extended trading after the company outlined an aggressive expansion strategy in artificial intelligence infrastructure, alongside plans to significantly increase borrowing and equity issuance.

The company said it expects to raise nearly $40 billion through a combination of debt and equity financing in 2027, including a previously announced $20 billion at-the-market equity program. The announcement heightened investor concerns about rising leverage as Oracle ramps up spending to compete in the rapidly expanding cloud and AI infrastructure market.

Oracle is positioning itself as a stronger competitor to major cloud providers such as Amazon and Microsoft, with large-scale data center deals involving clients like Meta Platforms and OpenAI.

The company also highlighted progress on its massive “Stargate” data center project in Texas, developed with OpenAI and partners. Oracle said the facility is expected to be more than three-quarters complete within 90 days, with customers soon able to access OpenAI’s advanced coding models on its cloud platform.

“Our pace of delivery continues to accelerate, with fiscal first-quarter 2027 capacity approaching one gigawatt, nearly equal to what we delivered over the previous four quarters combined,” CEO Clay Magouyrk said during an earnings call.

However, Oracle’s spending trajectory is also accelerating sharply. The company projected capital expenditures of up to $95 billion in fiscal 2027, though it expects $20–$25 billion of that to be offset through customer repayments. Oracle itself expects around $70 billion in direct capital spending.

This follows a year of elevated investment, with spending reaching $55.66 billion in 2026—above its earlier $50 billion target. The company had previously aimed to raise up to $50 billion in 2026 through debt and equity markets, underscoring its growing reliance on external financing.

Chief Financial Officer Hilary Maxson said gross margins are expected to decline in fiscal 2027 as data center expansion accelerates. She also noted that Oracle’s remaining performance obligations rose to $638 billion, surpassing analyst expectations of $592.52 billion.

Of this backlog, Oracle expects about 12%—roughly $76.56 billion—to be recognized within the next 12 months, and another 34% over the following two years.

Despite strong demand, analysts warn that funding remains a key risk. “The demand is real, but the funding question is getting harder, not easier,” said Jacob Bourne, analyst at eMarketer, pointing to rising capital expenditure and ongoing negative free cash flow.

Investor concerns are also growing that AI-driven tools could disrupt traditional enterprise software models by automating tasks previously handled by legacy systems.

Despite the financial pressure, Oracle reported fourth-quarter revenue of $19.18 billion, slightly above analyst estimates of $19.10 billion. Adjusted earnings came in at $2.03 per share, also beating expectations of $1.96.