Oracle $ORCL ( ▲ 7.58% ) did little to calm nerves on its earnings call. Instead, the company highlighted the same two issues that have already pushed the stock down 30 percent from its September peak. Investors remain focused on how much debt Oracle will need to fund its aggressive AI data center build-out and how long it will take for those investments to turn into high-margin cloud business.
Shares fell sharply in postmarket trading after Oracle reported light revenue and weaker-than-expected cloud sales. Capex also jumped to 12 billion dollars for the quarter, which was nearly 4 billion dollars above analyst estimates. The surge pushed free cash flow to negative 10 billion dollars, a miss of another 4 billion dollars versus expectations.
Management then announced an even bigger surprise. Oracle now expects fiscal 2026 capital spending to be 15 billion dollars higher than previously planned. That update set the tone for a call dominated by questions about debt levels, cash flow, and profitability. Nothing executives said afterward reversed the selloff.
Analysts pressed Oracle about how much capital it must raise to support its AI expansion. CEO Clay Magouyrk said the company has multiple funding structures, including models where customers bring their own chips or vendors rent capacity. He noted that Oracle is committed to maintaining its investment grade credit rating but did not provide a firm dollar figure. He added that analysts projecting Oracle will need 100 billion dollars for the full build-out are overestimating, although Street forecasts for future debt are not far from that level.
Consensus estimates show Oracle’s short-term debt rising to 33 billion dollars and long-term debt climbing to 151.2 billion dollars by 2030. That would be a net increase of 76.1 billion from today’s levels, which helps explain why credit default swap spreads have widened and investor anxiety has grown.
The second major concern is profitability. Oracle previously said its AI cloud customers would generate margins of 30 percent to 40 percent over the life of a contract. Analysts asked when those margins would become visible across Oracle’s global data center footprint. Principal Financial Officer Doug Kehring said it depends on how quickly new data centers come online. He explained that expenses do not begin until facilities are fully operational and that the lag between costs and revenue can be just a few months. Still, the margins will remain muted until a larger share of Oracle’s capacity is turned on and ramping.
The challenge is that recent results show signs of slow progress. Oracle missed cloud infrastructure expectations, delivering 66 percent constant currency growth versus estimates of 69 percent. Bloomberg Intelligence analysts said the shortfall likely reflects supply constraints that are also affecting other hyperscalers, but the miss still highlights the gap between Oracle’s massive backlog and its ability to convert that demand into realized revenue.
Investors wanted clarity and visibility from this call. Instead, they got higher capex, rising debt projections, and few specifics on when Oracle’s AI investments turn profitable.