Oracle Corporation (NYSE:ORCL) shares fell over 11% in after-hours trading following its announcement of $12 billion in capital expenditures in the November quarter. The decline is attributed to heavy investments in data centers for artificial intelligence customers, including OpenAI.
To support these initiatives, Oracle is incurring significant debt, having announced an $18 billion bond offering in September. The company has increased its capital expenditure forecast to $50 billion for the fiscal year ending May 2026, up $15 billion from previous projections.
Despite concerns from bankers regarding the growing debt, Oracle Cloud EVP Clay Magouyrk stated that the estimated $100 billion needed for data center expenses might be lower than feared. Operations EVP Doug Kehring indicated that the increased capex would generate an additional $4 billion in revenue in the next fiscal year. As of late November, Oracle reported $523 billion in signed contracts, boosted by cloud-server rental agreements with companies like Meta Platforms and Nvidia.
Cloud revenue is projected to reach $166 billion by fiscal 2030. In the last quarter, Oracle experienced 14% revenue growth year-over-year, with cloud-server rental revenue soaring 68% to $4.1 billion, suggesting a potential acceleration in growth in the current quarter.
#Investor Takeaway
The company's significant capital expenditures and debt accumulation create short-term uncertainty for shareholders, balancing immediate costs against long-term AI infrastructure dominance.
#Market Impact
Oracle's stock has fallen approximately 13% since announcing the updated spending plans, raising concerns about near-term cash flow. The elevated debt levels may impact investor sentiment and credit ratings moving forward.
#What’s Next
Investors should monitor Oracle's upcoming fiscal earnings report and any updates on its capital expenditure plans and debt management strategies.