Oracle shares plummeted 13% in premarket trading on Thursday, extending yesterday’s losses after the firm reported disappointing results.
The cloud computing and database software maker reported lower-than-expected quarterly revenue on Wednesday, despite booming demand for its artificial intelligence infrastructure. Its revenue came in at $16.06 billion, compared with $16.21 billion expected by analysts, according to data compiled by LSEG.
It dragged other AI-related names down with it. Chip darling Nvidia was last seen down 1.4% in premarket trading, memory and storage firm Micron was 1% lower, tech heavyweight Microsoft dipped 0.4%, cloud company Coreweave slid 3.9% and AMD was 1.3% in negative territory.
Oracle has been the subject of much market chatter since raising $18 billion in a jumbo bond sale in September, marking one of the largest debt issuances for the tech industry on record. The name shot onto investor agendas when it inked a $300 billion deal with OpenAI in the same month. Oracle made further moves into cloud infrastructure, where it battles Big Tech names such as Amazon, Microsoft and Google for AI contracts.
However, investors have questioned Oracle’s aggressive AI infrastructure build-out plans and whether it needs such a colossal amount of debt to execute, though other tech firms have also recently issued corporate bonds.
Oracle specifically has secured billions of dollars of construction loans through a consortium of banks tied to data centers in New Mexico and Wisconsin. The firm will raise roughly $20 billion to $30 billion in debt every year for the next three years, according to estimates by Citi analyst Tyler Radke.
On the company’s earnings call, Principal Financial Officer Doug Kehring committed to keeping Oracle’s investment-grade debt rating.
“In addition, there are other financing options through customers that may bring their own chips to be installed in our data centers and suppliers who may lease their chips rather than sell them,” he said. “Both of these options enable Oracle to synchronize our payments with our receipts and borrow substantially less than most people are modeling.”
Oracle expects about $50 billion in full-year capital expenditures, up from $35 billion as of September, with the new commitments, Kehring said. The sum for fiscal 2025 was $21.2 billion.
Its free cash flow — the metric investors are watching closely as they navigate AI bubble concerns, as it shows a company’s ability to pay its debt — for the November quarter was negative by about $10 billion. The StreetAccount consensus was negative $5.2 billion.
While this is “naturally a focus point of investors,” Wedbush Securities analysts said that it’s “a high class problem that Oracle is dealing with on the AI demand front.”
“Overall, Oracle’s core AI and cloud numbers and backlog tell a very healthy and robust AI Revolution demand story for the sector….any sell-off today on the sector we view as a clear buying opportunity given the underlying demand story that was further validated by Oracle last night.”
Oracle’s share price has moved 34% higher year-to-date despite recent losses.
— CNBC’s Seema Mody and Jordan Novet contributed to this report.