Oracle Shares Plummet 8% Amid Capital Raise and Cash Worries

Oracle shares experienced a significant downturn, plummeting 8% in after-hours trading. This sharp decline followed the software giant’s announcement of plans for an additional $20 billion capital raise, coupled with the revelation of negative free cash flow for the fiscal year. This marks a notable shift, as the stock is now down approximately 6% year-to-date, lagging behind the Nasdaq’s 11% gain.

Despite the investor apprehension surrounding capital expenditures and cash flow, Oracle’s fiscal fourth quarter presented a picture of robust top-line and bottom-line performance. Revenue surged by 21% year-over-year to $19.18 billion, surpassing the average analyst estimate of $19.1 billion, according to LSEG. Furthermore, adjusted earnings per share of $2.03 exceeded the consensus expectation of $1.96.

However, Oracle’s aggressive expansion in artificial intelligence infrastructure continues to cast a shadow over its stock performance. Investors are scrutinizing whether the company’s substantial investments will translate into sustainable profit growth, especially in light of a negative free cash flow of $23.7 billion in the last fiscal year.

The company’s ambitious growth strategy necessitates significant capital infusion. Oracle disclosed its intention to raise $40 billion through a combination of debt and equity financing, which includes the previously announced $20 billion share sale. This follows an already substantial capital raising of $43 billion in debt and $5 billion in equity during fiscal 2026.

The impact of this expansion is evident in Oracle’s capital expenditures, which skyrocketed by an astonishing 162% to $55.7 billion. New CFO Hilary Maxson further elaborated on the financial outlook, projecting a net cash outlay for capital expenditures in fiscal 2027 to be around $70 billion, excluding an estimated $20 billion to $25 billion in customer prepayments.

On the brighter side, Oracle reiterated its previous revenue guidance of $90 billion for fiscal year 2027, while simultaneously raising its adjusted earnings per share forecast to $8.05. This upward revision notably exceeds the analyst consensus of $8.01 per share and $88.9 billion in revenue, signaling management’s confidence in future profitability.

Analysts at Piper Sandler expressed a constructive view on Oracle’s AI-driven consumption growth, recommending a buy rating on the stock. They acknowledged that Oracle will likely remain a debated stock but emphasized the underlying growth drivers.

For the fiscal first quarter, Oracle projected adjusted earnings per share in the range of $1.72 to $1.76, with revenue growth anticipated between 27% and 29%. This guidance aligns favorably with analyst expectations, which called for $1.68 in adjusted earnings per share and $19.06 billion in revenue, implying approximately 28% growth.

A key driver of Oracle’s growth is its cloud infrastructure segment, which saw revenue jump by 93% to $5.8 billion. The company’s remaining performance obligation, a crucial indicator of future recognized revenue, reached an impressive $638 billion as of May 31, a staggering 363% increase. This figure significantly surpassed the analyst expectation of $595.67 billion.

Bank of America analysts, who also maintain a buy recommendation on Oracle shares, highlighted a significant strategic partnership. They reported that over 50% of Oracle’s remaining performance obligation stems from OpenAI, a key collaborator in the Stargate project, aimed at developing cutting-edge AI infrastructure in the United States.

Oracle is aggressively scaling its AI compute capacity. CEO Clay Magouyrk indicated on a conference call with analysts that the company aims to bring online nearly one gigawatt of computing power in the current quarter alone, a volume comparable to the total deployed in fiscal 2026. This accelerated deployment underscores the immense demand for AI-driven computing resources.