Oracle’s stock has fallen roughly 30% so far this quarter, putting the company on track for its steepest quarterly decline since the dot-com crash in the third quarter of 2001. The sell-off comes just months after a sharp rally, when shares surged 36% in September following the announcement of a landmark US$300 billion cloud infrastructure agreement with OpenAI.
The reversal reflects growing investor unease over the scale and pace of Oracle’s artificial intelligence expansion, particularly the financial risks tied to its aggressive investment strategy.
During its December earnings call, Oracle disclosed plans to spend about US$50 billion on capital expenditures in fiscal 2026. The figure is double the amount spent the previous year and around 43% higher than the company’s earlier guidance. The spending is largely aimed at rapidly expanding data centre capacity to support AI workloads, including those linked to OpenAI.
To finance this build-out, Oracle has significantly increased its borrowing. Total debt now exceeds US$111 billion, following an US$18 billion bond sale described as one of the largest ever by a technology company. The move has pushed credit risk indicators to their highest levels in 16 years, intensifying concerns about balance-sheet pressure.
Analysts have also flagged concentration risk as a key issue. Oracle’s cloud growth story is increasingly tied to OpenAI, raising questions about the long-term sustainability of that relationship. Some investors are wary of whether the AI startup, which faces intense competition and high cash burn, can continue to meet its substantial financial commitments over time.
The heavy investment cycle has already had a clear impact on cash generation. Oracle reported negative free cash flow of US$13.18 billion in its most recent quarter, a sharp deterioration driven by capital spending outpacing operating inflows.
Despite these pressures, Oracle points to its expanding backlog as evidence of long-term strength. Remaining performance obligations, a measure of contracted future revenue, jumped to a record US$523 billion, representing a 438% increase year on year. Management argues that this backlog provides strong visibility into future earnings.
Markets, however, remain unconvinced. Investors appear increasingly focused on whether Oracle can execute a build-out of this magnitude without further straining its finances, particularly in the near term, as AI infrastructure costs continue to rise across the industry.
Oracle shares slide as AI data centre concerns put rising debt under scrutiny
