Oracle shares slide as AI data centre spending surges ahead of cloud revenue growth

Oracle Corporation’s stock slid sharply after the company disclosed a steep increase in spending on artificial intelligence-focused data centres, unsettling investors who are growing cautious about how quickly these investments will translate into cloud revenue growth.

The enterprise software major reported capital expenditure of nearly $12 billion for the latest quarter, significantly higher than the previous quarter and well above analyst expectations. The announcement came alongside Oracle’s earnings release, triggering an 11 per cent drop in its share price, the company’s biggest single-day decline in close to a year.

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Oracle also revised its capital expenditure guidance upward, projecting around $50 billion in spending for the fiscal year ending May 2026. The increased outlay is aimed at expanding AI-ready cloud infrastructure as demand surges from large enterprise and technology clients.

While the company posted strong growth in its cloud business, results narrowly missed market estimates. Cloud revenue rose 34 per cent year-on-year to $7.98 billion, while infrastructure services grew 68 per cent to $4.08 billion. The slight miss amplified concerns that Oracle’s heavy investments may take longer than expected to deliver proportional revenue gains.

Analysts noted that the scale and speed of Oracle’s AI infrastructure expansion have raised questions about near-term profitability, especially as Wall Street reassesses how quickly AI-related spending can be monetised across the cloud industry.

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The increased capital expenditure has also put pressure on Oracle’s balance sheet. The company reported negative free cash flow of about $10 billion for the quarter, while total debt stands at approximately $106 billion. Reflecting heightened caution, the cost of insuring Oracle’s debt rose to levels not seen in over a decade, signalling growing credit risk concerns.

Oracle’s leadership sought to reassure investors during a post-earnings call, stating that most spending is directed toward revenue-generating data centre equipment rather than fixed assets. Executives also reiterated the company’s commitment to maintaining its investment-grade credit rating and highlighted operational efficiencies in deploying large-scale cloud infrastructure.

Despite the market reaction, Oracle maintained its forward guidance. The company expects revenue growth of 19 to 22 per cent in the current quarter, with cloud sales forecast to rise between 40 and 44 per cent. Its full-year revenue outlook remains unchanged at $67 billion.

The episode highlights broader tensions across the technology sector, where aggressive AI investments are driving long-term growth ambitions but also increasing short-term financial scrutiny from investors.