CAPEX surges 162% on data center investment; free cash flow hits -$23.7 billion

Oracle. [Getty Images]
Oracle. [Getty Images]

Oracle posted its worst weekly stock decline in 25 years, battered by mounting financial strain from AI data center spending and the blow of OpenAI delaying its initial public offering.

Oracle shares closed at $148.53 on Friday, down 18.4% for the week, according to CNBC. The five-session drop of $33.49 marked the steepest weekly decline since August 2001, when the dot-com bubble was unraveling.

The stock has fallen more than 55% since Oracle's market capitalization peaked at $900 billion in September last year.

The core problem is how the company is financing its expansion.

Capital expenditure for fiscal year 2026 surged 162% year-on-year to $55.7 billion, while free cash flow plummeted to negative $23.7 billion. Total debt stood at roughly $130 billion as of the end of May.

For the next fiscal year, Oracle plans to raise an additional $40 billion, including $20 billion through a new share issuance.

Evercore analysts said that even if demand signals remain strong, "the pace of financing, leverage levels and share issuance will be a key debate for near-term investors."

News of OpenAI's delayed IPO added to the pressure.

The New York Times reported that OpenAI is considering pushing its IPO to next year. Oracle holds a data center supply contract with OpenAI worth $300 billion through 2030.

Analysts have also noted a structural disadvantage: unlike Amazon, Microsoft and Google, Oracle lacks a full-spectrum cloud service offering, putting it at a competitive disadvantage in terms of profitability.

Concerns that AI models could replace Oracle's software products compounded the selloff. The iShares Expanded Tech-Software ETF (IGV) has fallen 16% this year, while Oracle has dropped 24% over the same period.

Oracle also cut its workforce by 21,000 employees, or 13%, in fiscal year 2026, citing AI adoption, bringing total headcount to 141,000.

The share price decline has pushed Oracle co-founder Larry Ellison down the global wealth rankings, behind Larry Page, Sergey Brin, Jeff Bezos and Michael Dell.

However, 71% of analysts still maintain a buy rating on Oracle shares, according to financial data firm FactSet. The company plans to proceed as scheduled with construction of additional data centers in Michigan, New Mexico and Texas next year.


yckim6452@heraldcorp.com