Oracle Corp. (ORCL) saw its shares drop 4.2% amid investor skepticism over a newly announced $15 billion investment strategy aimed at accelerating AI infrastructure and cloud expansion. The move has sparked concerns about rising debt and margin pressure.
- Oracle announced a $15 billion investment plan, with $9.8 billion allocated for capex over three years
- Operating margins expected to decline from 37.6% to 33.4% by FY2027
- Net debt-to-EBITDA ratio forecasted to increase from 1.8x to 2.4x
- Stock dropped 4.2% post-announcement amid investor caution
- Core database revenue reached $12.3 billion in Q3 2026, up 8% YoY
- New AI contract signed with energy firm worth $550 million
Oracle's stock declined sharply following the company's announcement of a comprehensive $15 billion capital allocation plan focused on scaling artificial intelligence capabilities and expanding its global cloud data center footprint. The initiative, detailed in a quarterly earnings presentation, includes $9.8 billion earmarked for capital expenditures over the next three years, primarily in server upgrades and new regional facilities. Analysts noted that while Oracle's long-term vision aligns with industry trends toward generative AI integration, the aggressive spending is raising red flags. With operating margins projected to dip from 37.6% in fiscal 2025 to an estimated 33.4% by FY2027, investors are questioning the sustainability of such a rapid buildout without corresponding revenue growth. Additionally, Oracle’s net debt-to-EBITDA ratio is expected to rise from 1.8x to 2.4x over the same period, signaling increased financial leverage. The market reacted swiftly, with institutional traders reducing positions in ORCL across major indices. Hedge funds managing over $25 billion in tech assets have reportedly scaled back exposure by 12% in the two days following the announcement, citing valuation risks relative to peers like Salesforce (CRM) and Microsoft (MSFT), which maintain lower capital intensity despite similar strategic goals. Despite these concerns, Oracle reiterated confidence in its core database business, which generated $12.3 billion in revenue during Q3 2026, up 8% year-over-year. The company also highlighted a growing pipeline of AI-driven enterprise contracts, including a $550 million deal with a multinational energy firm to modernize legacy systems using Oracle Cloud Infrastructure.