Oracle shares on pace for worst quarter since 2001 as new CEOs face concerns about AI buildout

Core Viewpoint - Oracle's new CEOs, Clay Magouyrk and Mike Sicilia, are facing significant challenges as the company's stock has dropped 30% this quarter, marking its steepest decline since 2001 and the dot-com bust [1][2]. Financial Performance - Oracle reported weaker-than-expected quarterly revenue and free cash flow, prompting the new finance leader to announce a $50 billion capital expenditure plan for fiscal 2026, which is 43% higher than previously planned and double the amount from the previous year [3]. - The company is also planning $248 billion in leases to enhance cloud capacity alongside building new data centers [3]. Debt and Investment Concerns - To support its growth plans, Oracle raised $18 billion in a significant bond sale, one of the largest in the tech industry, raising concerns about its ability to maintain an investment-grade debt rating [4]. - Analysts express skepticism about Oracle's capacity to meet its financial obligations without restructuring its contract with OpenAI, which has committed over $300 billion to Oracle [5]. Market Position and Growth Strategy - Oracle's revenue backlog surged by 359% due to its agreement with OpenAI, which initially boosted its stock by nearly 36% [8]. - The company aims to increase revenue to $225 billion by fiscal 2030, primarily driven by AI infrastructure, although this growth may come at the expense of profitability, with gross margins expected to decline from 77% in fiscal 2021 to about 49% by 2030 [15][16]. Investor Sentiment - Some investors remain cautious about Oracle's long-term plans, particularly its heavy reliance on OpenAI, which is facing its own financial challenges [17]. - Analysts have mixed views, with some issuing buy ratings based on potential revenue growth from OpenAI, while others highlight the need for Oracle to improve its market share in cloud infrastructure, where it lags behind competitors like Amazon and Microsoft [18][19].