- Oracle’s quarterly capex hit $16.5 billion, pushing the full-year total to $55.7 billion — above the $50 billion it had projected, and sending shares down ~11% in premarket trading.
- The company guided for $70 billion in net capex in fiscal 2027, with the reported figure running $20–$25 billion higher due to prepayments for AI server components.
- Cloud infrastructure revenue surged 93% to $5.8 billion, and remaining performance obligations — a key bookings metric — came in at $638 billion, beating estimates by nearly $50 billion.
- To fund its AI data center buildout, Oracle raised $43 billion in debt and equity in the past fiscal year and plans to raise another $40 billion next year, making it the largest non-financial issuer in the Bloomberg US high-grade bond index at $117 billion of outstanding debt.
What Happened?
Oracle reported fiscal fourth-quarter results that showed robust demand for its AI data center services but capital expenditures that meaningfully overshot its own guidance. Capex of $16.5 billion for the quarter brought the annual total to $55.7 billion — $5.7 billion above what Oracle had told investors to expect. The company then guided for $70 billion in net capex next fiscal year, with the actual reported figure running another $20–$25 billion higher due to component prepayments. Shares fell roughly 11% in premarket trading Thursday despite revenue of $19.2 billion growing 21% year-over-year and cloud infrastructure revenue nearly doubling to $5.8 billion, beating estimates.
Why It Matters?
Oracle’s spending overshoot crystallizes the central tension in the AI infrastructure trade: the revenue growth is real and accelerating, but the capital required to capture it keeps expanding faster than models projected. With $117 billion of debt outstanding — the largest non-financial issuer in the US investment-grade bond market — Oracle is essentially borrowing at scale to build data centers for OpenAI and other hyperscale customers. That works as long as contract bookings ($638 billion in remaining performance obligations) remain healthy and interest costs stay manageable. But the margin equation is tightening, and any slowdown in AI infrastructure demand could leave Oracle with an enormous fixed-cost base and insufficient revenue to service it.
What’s Next?
Investors will focus on whether Oracle’s massive bookings backlog — $638 billion, mostly large-scale AI contracts with upfront prepayments — actually converts to cash at the pace the company needs to service its debt. Management highlighted “significant progress” at its flagship Abilene, Texas data center for OpenAI, with 42% of capacity delivered and another 35% expected in the next three months. The planned $40 billion capital raise in fiscal 2027 will be closely watched by bond markets. Analysts at TD Cowen noted that Oracle’s recent stock run-up of 35% over three months had already priced in a good deal of optimism — leaving less room for disappointment on execution or spending.
Source: Bloomberg
