Oracle wants to blow $70 billion on data centres next year, while flat sales guidance has left investors reaching for the exits.
According to the Financial Times the database outfit said capital expenditure would rise 25 per cent from the $55.7 billion spent in the fiscal year that ended 31 May. The number was broadly in line with expectations, but Oracle said it expected to raise $40 billion in debt and equity over the next 12 months.
The spending plan went down like cold sick because Oracle kept its sales forecast for the next fiscal year flat at about $90 billion. Investors gave the usual polite response and knocked 12 per cent off the shares in New York morning trading.
Oracle co-chief executive Clay Magouyrk said the company delivered 1.2 gigawatts of capacity in 2026 and was making “significant progress” on several large data centre projects. He singled out work for OpenAI, which is becoming the sort of customer that can make balance sheets sweat.
The Austin, Texas-based company has been trying to prove there is proper money behind its AI infrastructure splurge. Late last year it signed a $300 billion contract with OpenAI to supply the ChatGPT maker with data centre capacity.
That deal requires Oracle to finance the upfront cost of construction, which explains the sudden craving for borrowed cash. Capital expenditure, mostly for AI data centres, hit $16.5 billion in the fiscal fourth quarter and pushed full-year spending to $55.7 billion.
Oracle had previously guided to $50 billion, so even its own spending promises have been mugged by the AI boom. The company raised billions in debt to fund the build-out, including $25 billion in February, after promising to keep its investment-grade credit rating.
Its shares were already down nearly 40 per cent from their autumn peak before Wednesday’s earnings release. The latest fall came despite better-than-expected fourth-quarter revenue of $19.2 billion and full-year revenue of $67.4 billion.
“AI infrastructure makes the existing cloud infrastructure market seem small. Everything we see shows that this market size is trillions of dollars per year,” ” Magouyrk said.
That sort of line plays well in a roadshow, but Oracle still has to build the things and get paid. The company is trying to balance the cost of data centres with investor demands for returns that look better than a bonfire of debt.
Oracle has leaned on customers to help finance chips for its data centres, which takes some strain off its own balance sheet. It said prepaid and customer-supplied hardware contracts now total $75 billion.
The company has made deep cuts too, shedding more than 30,000 roles in the past quarter to save cash for AI investments. Oracle previously told investors that coding tools meant it could get by with fewer developers, which is a cheery way to describe a cull.
