Shares of Oracle Corp. fell 9% in late trading today even though it surpassed Wall Street’s expectations on earnings and revenue and raised its profit forecast for the next financial year.

The problem: The database and cloud infrastructure giant revealed plans to raise even more debt to fund its ongoing artificial intelligence data center buildout.

The company reported fourth-quarter earnings before certain costs such as stock compensation of $2.03 per share while its revenue increased 21% from a year earlier to $19.18 billion. Those numbers were better than expected, with Wall Street analysts looking for earnings of just $1.96 per share on sales of $19.10 billion. All told, that meant Oracle boosted its net income to $4.22 billion at the end of the quarter, up from $3.43 billion in the year-ago period.

For the full year, Oracle reported $23.7 billion in negative free cash flow, while depreciation almost doubled to $7.62 billion. Its capital expenditures came to $55.66 billion, up 162% from a year earlier, highlighting the scale of its AI buildout.

Oracle decided to maintain its earlier fiscal 2027 revenue guidance of $90 billion, but said it’s raising its forecast for adjusted earnings to $8.05 per share. Those numbers are encouraging, since Wall Street was targeting fiscal 2027 earnings of $8.01 per share on sales of $88.9 billion.

The company also revealed that it’s planning to raise an additional $40 billion to finance its AI infrastructure buildout through a combination of debt and equity financing. That figure includes a $20 billion share sale announced a few months ago. Oracle had already raised $43 billion in debt and $5 billion through an equity sale this year, and that move led to concerns among investors, who wondered if it would actually see enough revenue generated from AI to justify such a high rate of borrowing.

For the current quarter, Oracle sees earnings of between $1.72 and $1.76 per share on revenue growth of between 27% and 29%. Wall Street is looking for earnings of about $1.68 per share on sales of $19.06 billion, which would imply growth of 28%.

Looking back at the prior quarter, Oracle said that revenue from its cloud offerings jumped 47% from the same period one year earlier, to $9.91 billion, falling short of the Street’s target of $9.97 billion. Software revenue, which includes license sales and support, came to $6.93 billion, down 2% but above the Street’s $6.82 billion consensus estimate.

Meanwhile, its cloud infrastructure unit saw sales rise 93%, to $5.8 billion. The company ended the quarter with remaining performance obligations, which include revenue that has been booked but not yet recognized, of $638 billion, up 363% from a year ago. Wall Street had been targeting $595.67 billion in RPO.

On a conference call with analysts, Chief Executive Clay Magouyrk (pictured) said that most of the RPO increase during the quarter resulted from large-scale AI contracts that saw customers prepay for graphics processing units, or else bought and supplied GPUs to the company. Bank of America analysts said in a note that more than 50% of Oracle’s RPO comes from OpenAI Group PBC.

This particular detail is a concern for many investors, Rebecca Wettemann, an analyst at Valoir, told SiliconANGLE, because if OpenAI misses its growth targets, it could mean that Oracle takes a real hit to its bottom line. “Oracle has too many eggs in the OpenAI basket, and that’s a problem because that company isn’t the clear leader in AI that we once thought it was,” she said. “At the same time, OpenAI’s business transactions will face a lot more scrutiny post-IPO, and that could make things much more complicated for Oracle.”

Magouyrk told analysts that the company is planning to bring about 1 gigawatt of new computing power online during the current quarter, which would be roughly equivalent to the amount bought online during the entirety of fiscal 2026.

During the quarter, Oracle hired a new chief financial officer: former Schneider Electric executive Hilary Maxson. On the call, she explained that the company’s net cash outlay for capital expenditures in fiscal 2027 will amount to about $70 billion, excluding about $20 billion to $25 billion in prepayments from customers and timing impact. The consensus for capex on Wall Street was $71.77 billion.

Wettemann said Oracle’s capex is another worry for investors, but she believes that once it gets its new data centers online, the company will be able to drive increasingly better margins for its cloud infrastructure business. “At its core, Oracle is an engineering company and its investments in autonomous infrastructure will continue to drive more efficiencies as its data center footprint evolves,” she said. “We expect to hear more from Oracle about how it can deliver data center performance more efficiently than its peers.”

The after-hours decline means that Oracle’s shares are now up just 3% in the year to date, trailing the S&P 500 index, which has gained 6% so far this year.

Photo: Oracle