Credit: Reuters Dec 11 (Reuters) – Oracle shares slumped nearly 11% in premarket trading on Thursday after downbeat forecasts and higher capex fanned worries that its massive AI investments are taking longer than expected to pay off.
Executives warned that capital expenditures for fiscal 2026 are now expected to be $15 billion higher than the $35 billion the company estimated in September during its first-quarter earnings call.
Oracle’s shares have risen nearly 34% this year, as mega cloud-computing deals with OpenAI and others and its plans to build large-scale AI cloud data centers helped boost sentiment.
However, investors have turned cautious, closely examining major cloud companies’ earnings reports for signs of an AI bubble fueled by heavy spending, high valuations, limited real-world productivity gains, and complex circular investments.
“We have mixed feelings about the scale of data center investments Oracle has planned over the coming years,” Morningstar analysts said in a note.
“If enthusiasm for AI diminishes over the long term and key customers like OpenAI reduce their computing demand, it could be difficult for Oracle to attract workloads that can substitute for AI model training and inference.”
The company’s closely watched metric for future cloud contracts also missed Wall Street estimates.
Oracle reported $523 billion in future contracts, below analysts’ estimates of $526 billion, according to Visible Alpha data.
On a conference call, in response to how Oracle would finance building the data centers, CEO Clay Magouyrk said, “One of them is that customers can actually bring their own chips, and in those models, Oracle obviously doesn’t have to incur any capital expenditures upfront for that model.”
The company forecast third-quarter revenue growth of between 16% and 18%, below the 19.4% estimate of $16.87 billion, according to LSEG data.
“This will be a question of patience for investors. This AI boom won’t be an overnight success, and spending in the short term is a necessity, but it will pressure margins,” said Farhan Badami, market analyst at eToro.
Oracle trades at a forward price-to-earnings ratio of 29.56, compared to rivals Microsoft at 27.24 and Amazon at 29.06, according to data compiled by LSEG.
Inside Telecom provides you with an extensive list of content covering all aspects of the Tech industry. Keep an eye on our News section to stay informed and updated with our daily articles.