Oracle stock is tumbling on cloud miss and costly data center plans: What it means for the AI bubble debate

Oracle Corporation reported increased revenue of 21 year-over-year (YOY) for its fiscal fourth quarter, but it wasn’t enough to please stockholders. The company’s shares (NYSE: ORCL) dropped over 10 during premarket, following Wednesday evening’s earnings report. At publication, shares were about 9 down. With 19.18 billion in revenue, Oracle beat Wall Street’s 19.10 billion estimate, according to a consensus cited by CNBC. Similarly, the company reported 2.03 adjusted earnings per share, up from a predicted 1.96 per share. However, Oracle missed Wall Street’s estimates for its Cloud revenue. At 9.91 billion, it made up 52 of the company’s overall quarterly revenue and was a 47 increase YOY. Analysts had expected 9.97 billion. Debt and equity financing Oracle also announced plans to raise about 40 billion in debt and equity financing in fiscal 2027. About 20 billion of that comes from a previously disclosed at-the-market equity issuance. It follows 48 billion raised in fiscal 2026 between the two avenues—a number the company doesn’t plan to further increase this year. “Importantly, these investments are being driven by committed customer demand, reflected in our record RPO [remaining performance obligations], giving us confidence in our long-term outlook as well as strong returns on the capital we’re deploying,” Oracle CFO Hilary Maxson said in a post-earnings call. “This demand is allowing us to garner customer prepayments and bring your own hardware at similar or better margins than the rest of our contracts.” Oracle’s RPO were up 363 YOY at 638 billion. The company credited the growth to “large scale AI contracts where the customer prepaid Oracle for the purchase of the GPUs, or the customer bought and supplied the GPUs to Oracle.” “The prepaid and customer supplied hardware portions of our large AI contracts now total 75 billion,” Oracle further stated in its earnings report. “This substantially reduces the amount of capital Oracle must raise to build out our AI datacenters.” Broader AI bubble fears have some analysts worried Yet, some investors still see risk in overfunding AI, with some analysts recently warning that the AI bubble could burst. Current trends are reminiscent of those during the dot-com bubble and subsequent market collapse in the early 2000s. At the end of May, the SP 500 closed at a record high, but it was fueled by only 20 stocks hitting all time highs—13 of which were AI-related. Michael Hartnett at Bank of America pointed out that only 20 stocks also hit a high when the dot-com bubble was at its highest in March 2000, CNBC reports.