Oracle ramps AI capex to US$50 billion as free cash flow swings to billions of losses
Oracle just turned the AI trade into a live-fire drill on leverage and cash flow.
According to BNN Bloomberg, Oracle shares fell as much as 15.6 percent on Thursday, wiping out nearly US$93bn in market value, after the company paired a revenue miss with a much more aggressive AI spending plan.
CNBC reported the stock was down about 11 percent on the day and still up roughly 34 percent year-to-date.
Oracle’s top line slightly disappointed: CNBC said the company posted quarterly revenue of US$16.06bn versus US$16.21bn expected, based on LSEG data.
According to BNN Bloomberg, Oracle also guided third-quarter revenue growth of 16 percent–18 percent, below the 19.4 percent that analysts had forecast.
The real shock came from capex and funding.
Oracle now expects about US$50bn in capital expenditures for the current fiscal year, up from a previous forecast of US$35bn, driven by new AI-related contracts with firms like Meta and Nvidia, as reported by CNBC.
BNN Bloomberg added that the company also flagged fiscal 2026 capex running US$15bn above its own September estimate, with a large share tied to OpenAI-related data centres.
To support that build-out, CNBC reported that Oracle raised US$18bn in a jumbo bond sale in September—one of the largest tech-sector debt deals on record—and is expected to raise about US$20bn–US$30bn in debt annually over the next three years, according to Citi analyst Tyler Radke.
By the end of November, Oracle owed more than US$124bn including operating lease liabilities, up from about US$89bn a year earlier.
BNN Bloomberg reported that Oracle’s five-year credit default swaps hit record highs as it borrows heavily for data centre expansion.
Lease and capacity commitments are also surging.
As of November 30, Oracle had US$248bn in lease commitments for data centres and cloud capacity, up 148 percent from the end of August, plus US$10bn in cloud capacity arrangements, according to a quarterly filing cited by CNBC.
The strain is visible in cash flow.
Oracle’s free cash flow for the November quarter was about –US$10bn, versus a StreetAccount consensus of –US$5.2bn, as heavy AI capex outpaced inflows.
Valuation has not fully reset.
BNN Bloomberg said Oracle trades at a forward price-to-earnings ratio of 29.56, compared with Microsoft at 27.24 and Amazon at 29.06, based on LSEG data, and noted that at least 13 brokerages cut their price targets after the update.
The growth story rests on AI infrastructure.
Over the past decade, Oracle has expanded into cloud infrastructure and now competes with Amazon, Microsoft and Google for AI workloads.
CNBC reported that OpenAI has become a major Oracle customer with a commitment worth over US$300bn, and that Oracle worked with Crusoe on the first phase of OpenAI’s “Stargate” data centre in Abilene, Texas.
BNN Bloomberg noted that Oracle has also signed cloud-computing deals with OpenAI and others to support its push into AI.
Investor debate is now less about demand and more about timing and risk.
Tech investors are wary of an AI bubble, pointing to “sky-high valuations, limited real-world productivity gains and complex circular investments,” even as companies raise billions in new debt.
Market analyst Farhan Badami at eToro told BNN Bloomberg, “This will be a question of patience for investors. This AI boom won’t be an overnight success, and spending in the short term is a necessity, but it will pressure margins.”
Some analysts frame the sell-off as an opportunity rather than a warning.
BofA Global Research “brushed off concerns over the inflated expenditure,” arguing that “the current weakness is more capex investment cycles needed to support demand” given the “abnormal speed” of AI investment needs.
Wedbush Securities called Oracle’s negative free cash flow “a high class problem that Oracle is dealing with on the AI demand front” and said “any sell-off today on the sector we view as a clear buying opportunity,” as reported by CNBC.
On the earnings call, principal financial officer Doug Kehring tried to reassure markets on funding and credit quality.
CNBC reported that he committed to maintaining Oracle’s investment-grade rating.
He highlighted options such as customers bringing their own chips and suppliers leasing chips rather than selling them, which he said would help “synchronize our payments with our receipts and borrow substantially less than most people are modeling.”
He also pointed to multiple funding channels across public bond, bank and private debt markets, while co-CEO Clay Magouyrk noted that customer-provided chips could lower costs.
