Oracle's AI Funding Paradox
Oracle Reports Q4 Beat; Shares Drop on $40B AI Capital Raise Plans
Key Points
Oracle reported fourth-quarter results that beat expectations on both earnings and sales: earnings (excluding certain costs like stock compensation) of $2.03 per share on revenue of $19.18 billion (+21% year over year), with net income rising to $4.22 billion from $3.43 billion a year earlier. For the full year, Oracle posted negative free cash flow of $23.7 billion and capex of $55.66 billion (+162%).
Oracle’s capital plan included specific financing mechanics that help explain the dilution concerns: it said it would raise another $40 billion for AI infrastructure via a mix of debt and equity, including a $20 billion share sale. The company had already raised $43 billion in debt and $5 billion through an equity sale earlier this year.
While Oracle reaffirmed longer-term revenue guidance for fiscal 2027 at $90 billion, it raised adjusted earnings to $8.05 per share—slightly above Street expectations of $8.01 per share for fiscal 2027.
Market pressure tied to the Oracle selloff came with clearer macro cross-currents and index/commodity moves: investors pushed the Dow back below 50,000 (down 1.9%), the S&P 500 fell 1.6% to five-week lows, and the Nasdaq dropped about 2%. In commodities, WTI crude rose above $92, while gold fell below $4,065 and silver below $63.
Oracle attributed cloud strength directly to demand for Oracle Cloud Infrastructure (OCI) and its cloud applications, with CEO Safra Catz saying: “Our cloud business continues to grow at a remarkable pace, reflecting the trust our customers place in our technology.” One report also said cloud services and license support account for more than 70% of revenue, with cloud services revenue up 16% to $8.8 billion.
Oracle beat Wall Street's expectations for its fiscal fourth quarter, posting revenue of $19.18 billion — up 21% year over year — and adjusted earnings of $2.11 per share, according to Oracle Investor Relations. But shares slid roughly 8% after hours when the company revealed plans to raise another $40 billion in fresh capital for AI data centers, including a $20 billion stock sale that alarmed investors worried about dilution.
The sell-off deepened an already rough session on Wall Street. The Dow Jones fell below 50,000 for the first time in months, closing at 49,918 — down 1.87% — while the S&P 500 dropped 1.62% and the Nasdaq shed nearly 2%, per KuCoin TechFlow. Hot inflation data and renewed U.S.-Iran military tensions piled onto investor anxiety already rattled by Oracle's capital plans.
Oracle's Cloud Machine Is Growing — And Expensive
Oracle's cloud business drove the quarter. Cloud revenue hit $9.91 billion, with Oracle Cloud Infrastructure — known as OCI — growing 93% to $4.9 billion, according to Seeking Alpha. CEO Safra Catz said the cloud business is growing "at a remarkable pace, reflecting the trust our customers place in our technology." Cloud services and license support now account for more than 70% of total revenue.
The company's remaining performance obligations — essentially future contracted revenue — ended the quarter at $638 billion, up 363% year over year. Oracle signed $67 billion in new AI infrastructure contracts in Q4 alone, TipRanks reported. Chairman Larry Ellison noted that 97.5% of global GPUs are currently in use, underscoring the tight supply driving demand for Oracle's data centers.
$40 Billion Raise Triggers Dilution Alarm on Wall Street
Oracle already raised $48 billion in fiscal 2026 — $43 billion in debt and $5 billion in equity. Now it plans to raise another $40 billion in fiscal 2027. Half of that, $20 billion, will come from selling new shares. CFO Hilary Maxson clarified that Oracle does "not anticipate raising additional debt funding in calendar year 2026," per Seeking Alpha. But the equity component hit investors hard.
The numbers explain why. Oracle spent $55.66 billion on capital expenditures in fiscal 2026 — up 162% from the prior year — and burned through $23.7 billion in free cash flow for the full year. Management projected roughly $70 billion in capex for fiscal 2027. SiliconAngle reported that analysts flagged the massive spending as a sign that "the AI bill has arrived" and the funding "is not free."
Inflation Shock and Iran Tensions Crushed the Broader Market
Oracle's news landed on the worst possible day. That morning, May CPI data showed inflation rebounding to 4.2% — a three-year high — rattling bond markets and stoking fears the Federal Reserve could raise rates again, according to KuCoin TechFlow. The VIX fear index surged 11.83% to 22.22. WTI crude rose above $92 a barrel as conflict in the Middle East threatened oil supply routes.
Reports of U.S. retaliatory strikes against Iranian air defense sites near the Strait of Hormuz circulated during afternoon trading, per Mettis Global. President Trump warned Iran had "taken too long to negotiate a deal" and the U.S. would be "attacking them very hard." Defensive assets offered little shelter — gold dipped below $4,065 and silver fell under $63 as investors sold broadly.
Oracle Still Sees $90 Billion in Revenue by Fiscal 2027
Despite the sell-off, Oracle kept its long-term targets intact. The company reaffirmed its fiscal 2027 revenue goal of $90 billion and raised its adjusted earnings forecast to $8.05 per share — just above the Street's estimate of $8.01, per TheStreet. For the first quarter of fiscal 2027, Oracle guided for adjusted EPS of $1.72 to $1.76, slightly above consensus.
Oracle management argued the risk is lower than it looks. Catz noted that $75 billion in customer-prepaid or customer-supplied hardware "substantially reduces the amount of capital Oracle must raise" on its own. Bulls point to the $638 billion RPO as proof demand is real. Bears, as Seeking Alpha noted, worry that converting those contracts to profit will take years — while dilution hits shareholders now.
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