Oracle stock drops after AI spending plans raise concerns

Oracle stock dropped after strong earnings as $40B AI spending plans and rising debt raised investor concerns, overshadowing record revenue and backlog growth.

Oracle's stock experienced a sharp decline following its latest earnings report, despite surpassing analyst expectations for both revenue and profit. The company posted strong fiscal fourth-quarter results, with adjusted earnings per share of $2.11 and revenue of $19.18 billion, both exceeding estimates. Oracle's backlog of performance obligations reached record highs, largely fueled by major AI contracts, including those with OpenAI. However, investor sentiment turned negative after Oracle announced plans to raise $40 billion through debt and equity financing to fund its AI infrastructure expansion. Concerns mounted over rising capital expenditures, negative free cash flow, and a significant increase in long-term debt, now at $99.6 billion. These financial worries overshadowed the positive results, causing the stock to fall between 3% and 11% in various trading sessions. The aggressive AI spending and higher leverage raised doubts about the sustainability of Oracle's growth, impacting both equity and crypto markets.