Oracle stock plunges as AI data center spending hits $12 billion and FY26 capex jumps to $50 billion

Core Viewpoint - Oracle Corp. shares experienced a significant decline due to increased spending on AI data centers and equipment, which is taking longer to convert into cloud revenue than investors anticipated [1]. 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]. - Oracle now projects capital expenditures to total around $50 billion for the fiscal year ending in May 2026, a $15 billion increase from prior forecasts [3]. - Total revenue for the quarter grew by 14% to $16.1 billion, with cloud sales increasing by 34% to $7.98 billion and infrastructure revenue rising by 68% to $4.08 billion, although these figures fell short of analysts' estimates [7][15]. Market Reaction - Oracle's stock fell 11% to $198.85, marking the largest single-day drop in nearly 11 months, and the stock has lost about a third of its value since reaching a record high on September 10 [4]. - The company's credit risk reached a 16-year high, with the cost of protecting its debt against default rising significantly [8]. Strategic Developments - Oracle is heavily investing in data center infrastructure to support AI initiatives, including partnerships with companies like OpenAI, TikTok, and Meta [6]. - The company reported a significant increase in remaining performance obligations, which rose more than fivefold to $523 billion, slightly above analysts' expectations [9]. Debt and Cash Flow - Oracle's cash burn increased, resulting in a negative free cash flow of $10 billion, with total debt amounting to approximately $106 billion [12]. - The cost of protecting Oracle's debt against default has risen, reflecting declining investor confidence in the company's credit quality [8]. Future Outlook - Oracle's management expects total revenue to increase by 19% to 22% in the current period, with cloud sales projected to rise by 40% to 44%, aligning with analysts' estimates [17].