Oracle Shares Plunge $80bn Amid Mixed Q4 Results and AI Spending Concerns
Oracle's shares dropped 15% after-hours, wiping about $80bn off the company's market value, down from approximately $630bn to $550bn. In the quarter to November, Oracle reported a 14% revenue increase to $16bn, with cloud computing revenue climbing 34% and infrastructure revenue surging 68%.
The company plans a 40% rise in capital expenditure to about $50bn, primarily for building datacentres. However, long-term debt has grown 25% over 12 months to $99.9bn, accompanied by increased debt-insurance costs. Investors expressed wariness about Oracle's AI-related spending financed by debt, given an unclear timeline for associated revenue generation and concerns over sustainability.
Oracle has secured AI-related contracts, including with OpenAI, reporting 440% revenue growth from customer agreements driven by commitments from Meta and Amazon. Despite this, analysts caution that this may reflect reliance on a small number of large customers. Kathleen Brooks and Ipek Ozkardeskaya warned that heavy AI investments and circular funding within the AI ecosystem might undermine investor confidence if the company does not achieve profitability. Following Oracle's results, Nvidia shares also declined, highlighting ongoing market sensitivity to AI stock valuations and fears of a potential bubble.
