Key Stats for Oracle Stock
- Price Change for Oracle stock: -5.40%
- $ORCL Share Price as of Dec. 17: $178
- 52-Week High: $346
- $ORCL Stock Price Target: $291
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What Happened?
Oracle (ORCL) stock has been in free fall lately, dropping roughly 50% from its September 10 high when the company disclosed a massive AI backlog.
The latest blow came last week when the Financial Times reported that talks with Blue Owl Capital to back a $10 billion Michigan data center had stalled over debt concerns, a claim Oracle also pushed back on.
According to CNBC, Blue Owl had been in talks with Oracle about funding a 1-gigawatt facility for OpenAI in Saline Township, Michigan.
Oracle also reported disappointing fiscal second-quarter results despite beating on earnings. Revenue came in at $16.06 billion, missing Wall Street’s $16.21 billion estimate.
While adjusted earnings per share of $2.26 crushed the $1.64 consensus, investors focused on the revenue miss and troubling cash flow trends.
Free cash flow was negative $10 billion for the quarter, nearly double the expected negative $5.2 billion.
The company’s remaining performance obligations (RPO) skyrocketed 438% to $523 billion, driven by new commitments from Meta, Nvidia, and others, including a massive $300 billion deal with OpenAI over five years.
But that aggressive AI infrastructure buildout comes at a steep cost. Oracle now expects about $50 billion in full-year capital expenditures, up from $35 billion just three months earlier.
Making matters worse, Oracle stock took additional hits from separate reports about its data center plans. Bloomberg reported potential delays in completing OpenAI data centers until 2028 rather than 2027, citing labor and material shortages—though Oracle disputed this.
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What the Market Is Telling Us About Oracle Stock
The sell-off in Oracle stock reflects growing investor anxiety about the company’s debt-fueled AI expansion strategy.
Oracle raised $18 billion in a jumbo bond sale in September—one of the largest debt issuances in tech industry history.
The company has also secured billions in construction loans for data centers in New Mexico and Wisconsin.
Citi analyst Tyler Radke estimates Oracle will raise roughly $20 billion to $30 billion in debt annually for the next three years.
Venture capitalist Tomasz Tunguz noted that Oracle’s debt-to-equity ratio has ballooned to 500%, “dwarfing its cloud computing peers.”
Amazon, Microsoft, Meta, and Google all have ratios between 7% and 23%. The only other company with a notably high ratio in this space is CoreWeave at 120%, Tunguz wrote.
On the earnings call, Principal Financial Officer Doug Kehring tried to reassure investors, committing to maintain Oracle’s investment-grade debt rating.
He suggested alternative financing options, including customers bringing their own chips to Oracle’s data centers and suppliers leasing chips rather than selling them outright.
These approaches would help Oracle “synchronize payments with receipts and borrow substantially less than most people are modeling,” Kehring said.
Oracle’s cloud infrastructure revenue grew 68% to $4.1 billion, and the company pointed to cloud wins with Airbus, Canon, Deutsche Bank, and others. But software revenue fell 3% to $5.88 billion, missing estimates.
Oracle stock is still up 34% year-to-date despite recent losses, but the company needs to prove it can generate returns that justify the massive spending and debt load.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
