Oracle faces worst quarter since 2001 amid AI investment concerns
What's the story
Oracle, the tech giant founded by billionaire Larry Ellison, is witnessing a major slump in its stock. The company's shares have fallen by a whopping 30% so far this quarter, according to CNBC. With just a few trading days left, the decline could be Oracle's worst since the dot-com crash in 2001.
Investor concerns
Wall Street questions Oracle's ability
Despite OpenAI's $300 billion financial commitment to Oracle, Wall Street is skeptical about the company's ability to deliver new server farms for the AI giant. Earlier this month, Oracle reported lower-than-expected quarterly revenue and free cash flow. During an earnings call, its new finance chief Doug Kehring announced plans for $50 billion in capital expenditures for fiscal 2026, 43% more than previously planned and double last year's total.
Growth strategy
Oracle's ambitious plans and rising debt
Oracle also plans to invest significantly in leases to expand its cloud capacity, in addition to building new data centers. This aggressive growth strategy will require a significant amount of debt. In September, the company raised $18 billion in a massive bond sale, one of the largest ever in the tech sector. Despite promises from top executives to maintain its investment-grade rating, cautious investors are raising concerns about Oracle's ability to meet these obligations without restructuring its OpenAI contract.
Market reaction
Stock performance and future growth projections
After the news of OpenAI's deal on September 10, Oracle's stock soared nearly 36%, marking its third-largest jump since its 1986 IPO. However, the shares have since plunged by 43%. Despite this volatility, Oracle's new executives are optimistic about long-term growth. They project revenue will rise to $225 billion in fiscal year (FY) 2030 from $57 billion in FY 2025.