SAN FRANCISCO: Oracle’s capital spending for 2026 has exceeded its projection, and the cloud computing company says it will raise more debt in 2027.
This reflects the staggering scale of cash burn needed to build out its artificial intelligence (AI) infrastructure.
Its shares fell 5.8% in extended trading, after Oracle said it expects to raise nearly US$40bil through a combination of debt and equity financing in 2027.
This includes its previously announced US$20bil at-the-market equity issuance.
The company spent about US$55.66bil in 2026, above its target of US$50bil, amid intense investor scrutiny over its rising debt load.
Oracle had said in February it aimed to raise as much as US$50bil this year through a combination of debt and equity sales.
Oracle CFO Hilary Maxson told analysts on a conference call that the company’s gross margins will “step down” over its just-begun fiscal 2027 as it ramps up data centre projects.
Oracle also said it now has remaining performance obligations, a key measure of future revenue under contract, of US$$638bil.
This is well above analyst estimates of US$592.52bil, according to data from Visible Alpha.
Maxson for the first time gave a time frame for how soon Oracle expects that contracted revenue to arrive saying the company expects 12% of it, or US$76.56bil, over the next 12 months, and another 34%, or about US$216.92bil, in the two years after that.
But how Oracle will fund the capital spending to earn that revenue remains a top concern for investors, said Jacob Bourne, an analyst at eMarketer.
“The demand is real with cloud infrastructure revenue and backlog growing fast.
“But the funding question is getting harder, not easier, with capital expenditure coming in well above estimates and free cash flow still negative,” he said.
The software industry is also contending with growing investor concerns that AI tools could pull enterprise clients away from traditional software by taking over tasks once done by their products.
Oracle had reported revenue of US$19.18bil for the fourth quarter (4Q), compared with analysts’ average estimate of US$19.10bil, according to data compiled by the London Stock Exchange Group.
Its adjusted profit of US$2.03 per share for the 4Q exceeded expectations of US$1.96. — Reuters
