Oracle Slides by Most Since January on Mounting AI Spending

Core Viewpoint - Oracle Corp. is experiencing significant stock decline due to increased spending on AI data centers and equipment, which is not translating into cloud revenue as quickly as investors desire [1][4]. Financial Performance - Capital expenditures for the quarter reached approximately $12 billion, up from $8.5 billion in the previous period, exceeding analysts' expectations of $8.25 billion [2]. - Cloud sales for the fiscal second quarter increased by 34% to $7.98 billion, while revenue from the infrastructure business rose by 68% to $4.08 billion, both figures falling short of analysts' estimates [3]. Market Reaction - Oracle's shares fell about 13% in early trading, marking the largest intraday drop since January 27, with the stock losing about a third of its value since reaching a record high on September 10 [4]. Business Strategy - Oracle is expanding its data center capabilities to support AI initiatives for clients like OpenAI, TikTok, and Meta Platforms, with a remaining performance obligation of $523 billion, significantly higher than the estimated $519 billion [5]. - The company has incurred substantial debt and is leasing multiple data center sites to support its aggressive expansion strategy [6]. Investor Sentiment - There is growing skepticism on Wall Street regarding the costs and time required for Oracle's large-scale AI infrastructure development, leading to increased scrutiny over its debt-fueled expansion [6][8]. - The company's bonds have weakened, with default-protection costs reaching the highest level since 2009, indicating investor concerns about its financial stability [7].