Oracle’s AI spending blows past estimates, raising worries over growing debt

[SAN FRANCISCO] Oracle on Wednesday (Jun 10) forecast capital spending plans for fiscal 2027 above Wall Street estimates, as the cloud computing company said it will also raise more debt in 2027, reflecting the staggering scale of cash burn needed to build out its AI infrastructure.

Its shares fell 8.9 per cent in extended trading, after Oracle said it expects to raise nearly US$40 billion through a combination of debt and equity financing in 2027. This includes its previously announced US$20 billion at-the-market equity issuance.

Oracle, which has major deals to build data centres for customers such as Meta Platforms and OpenAI, is working to position itself as a major rival to cloud leaders such as Amazon.com and Microsoft.

Oracle said on Wednesday that a massive “Stargate” data centre in Texas it is building with OpenAI and others will be more than three-quarters complete within 90 days, and OpenAI said customers can start accessing OpenAI’s cutting-edge coding models on Oracle’s cloud.

“Our pace of delivery continues to accelerate with our (fiscal first quarter of 2027) delivery approaching one gigawatt, nearly the same capacity as we’ve delivered in the previous four quarters combined,” Oracle CEO Clay Magouyrk told analysts on a conference call.

But Oracle is also increasingly spending like those larger rivals, saying on Wednesday it expects capital expenditures of up to US$95 billion in fiscal 2027, though it expects repayments from customers for up to US$25 billion of that.

The company spent about US$55.66 billion in 2026, above its target of US$50 billion, amid intense investor scrutiny over its rising debt load. Oracle had said in February it aimed to raise as much as US$50 billion this year through a combination of debt and equity sales.

CFO details spending breakdown

Oracle CFO Hilary Maxson said on the conference call that Oracle expects US$70 billion in capital spending of its own in fiscal 2027, plus another US$20 billion to US$25 billion that it expects to be repaid for, though Maxson did not give a timeline for how quickly Oracle expects the repayments. Analysts expected US$67.66 billion in capital spending for fiscal 2027, according to LSEG data.

Maxson also said the company’s gross margins will “step down” over its just-begun fiscal 2027 as it ramps up data-centre projects.

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Oracle also said it now has remaining performance obligations, a key measure of future revenue under contract, of US$638 billion, above analyst estimates of US$592.52 billion, according to data from Visible Alpha.

Maxson for the first time gave a time frame for how soon Oracle expects that contracted revenue to arrive, saying the company expects 12 per cent of it, or US$76.56 billion, over the next 12 months, and another 34 per cent, or about US$216.92 billion, in the two years after that.

Capital spending worries persist

But how Oracle will fund the capital spending to earn that revenue remains a top concern for investors, said Jacob Bourne, an analyst at eMarketer.

“The demand is real with cloud infrastructure revenue and backlog growing fast. But the funding question is getting harder, not easier, with capex coming in well above estimates and free cash flow still negative,” he said.

The software industry is also contending with growing investor concerns that AI tools could pull enterprise clients away from traditional software by taking over tasks once done by their products.

Oracle reported total revenue of US$19.18 billion for the fourth quarter, compared with analysts’ average estimate of US$19.10 billion, according to data compiled by LSEG.

Its adjusted profit of US$2.03 per share for the quarter exceeded expectations of US$1.96. REUTERS