Oracle Plans Massive AI Infrastructure Expansion Despite Rising Debt Concerns
Oracle has projected significantly higher capital expenditures for fiscal 2027 than Wall Street expected, highlighting the enormous investment required to expand its artificial intelligence infrastructure and cloud computing operations.
The company also revealed plans to raise additional capital through debt and equity financing, signaling the substantial costs associated with competing in the rapidly growing AI market.
Investors reacted cautiously to the announcement, sending Oracle shares down 8.9% in after-hours trading.
Oracle Targets Nearly $40 Billion in New Financing
Oracle said it expects to secure close to $40 billion in funding during fiscal 2027 through a combination of debt and equity offerings. The figure includes the company’s previously announced $20 billion at-the-market stock issuance program.
The financing will help support Oracle’s aggressive expansion strategy as it seeks to challenge cloud computing leaders such as Amazon and Microsoft.
Major AI Projects Drive Spending Growth
Oracle has secured significant agreements to build data center infrastructure for major clients, including OpenAI and Meta Platforms.
One of the company’s largest initiatives is the Stargate data center project in Texas, which Oracle is developing alongside OpenAI and other partners. According to Oracle, the facility is expected to be more than 75% complete within the next 90 days.
OpenAI also announced that customers will soon be able to access its advanced coding models directly through Oracle’s cloud platform.
Oracle executive Clay Magouyrk stated that the company is rapidly accelerating data center deployment, with fiscal first-quarter 2027 delivery capacity approaching one gigawatt, nearly matching the total capacity delivered over the previous four quarters combined.
Capital Spending Set to Reach $95 Billion
Oracle expects total capital expenditures of up to $95 billion during fiscal 2027. However, the company indicated that up to $25 billion of that amount could eventually be reimbursed by customers.
Even after accounting for potential repayments, Oracle’s spending plans remain significantly above analyst expectations.
The company spent approximately $55.66 billion during fiscal 2026, exceeding its original target of $50 billion as demand for AI infrastructure continued to accelerate.
CFO Details Spending and Revenue Outlook
Chief Financial Officer Hilary Maxson provided further details regarding Oracle’s investment plans, stating that the company expects roughly $70 billion in direct capital expenditures, alongside another $20 billion to $25 billion in customer-funded projects.
Maxson also warned that Oracle’s gross margins are expected to decline during fiscal 2027 as the company scales up construction of new data centers.
Despite concerns over spending, Oracle reported remaining performance obligations of $638 billion, a key measure of future contracted revenue. The figure exceeded analyst expectations and highlights the company’s rapidly expanding order backlog.
According to Maxson, approximately 12% of this contracted revenue, or $76.56 billion, is expected to be recognized over the next 12 months. Another 34%, representing roughly $216.92 billion, is projected to be realized during the following two years.
Investors Remain Focused on Funding Risks
While demand for Oracle’s cloud and AI services continues to grow, investors remain concerned about how the company will finance its ambitious expansion plans.
Analysts note that although cloud infrastructure revenue and contract backlogs are increasing rapidly, free cash flow remains under pressure and capital spending continues to exceed expectations.
The broader software industry is also facing growing concerns that advanced AI tools could eventually replace some traditional enterprise software functions, creating new competitive challenges for established technology providers.
Oracle Delivers Strong Quarterly Results
Despite investor concerns surrounding spending and debt, Oracle reported stronger-than-expected financial results for its fourth quarter.
Total revenue reached $19.18 billion, slightly ahead of analyst forecasts of $19.10 billion. Adjusted earnings came in at $2.03 per share, exceeding market expectations of $1.96 per share.
The results underscore Oracle’s continued growth momentum as it invests heavily to secure a larger share of the global AI and cloud infrastructure market.
