Oracle's AI spending blows past estimates, raising worries over growing debt
Short summary
Oracle projects up to $95 billion in capital spending for fiscal 2027 to expand its AI-focused cloud data centers, expecting to recoup $20–25 billion from customer repayments. It plans to raise nearly $40 billion through debt and equity, including a $20 billion at-the-market stock issuance, as it vies with Amazon and Microsoft.
- Oracle is guiding to $95B in capex for fiscal 2027, far above the $67.7B Wall Street expected, and it already overshot its FY2026 target ($55.66B vs. $50B goal)
- It's funding this with nearly $40B in new debt and equity, including a $20B at-the-market stock offering, raising leverage concerns
- Shares dropped 8.9% after-hours despite backlog (future contracted revenue) hitting $638B, beating the $592.5B forecast
- CFO warned gross margins will shrink as spending on data centers accelerates, with $70B of the capex being Oracle's own money and $20-25B customer-funded
Full summary
Oracle plans to boost its capital spending to as much as $95 billion in fiscal 2027, well above Wall Street’s $67.7 billion estimate. That figure includes up to $25 billion Oracle expects to recoup from customers building out data centers. The company already blew past its previous target in fiscal 2026, spending $55.66 billion versus a $50 billion goal. To fund the expansion, Oracle told investors it will raise nearly $40 billion next year through debt and equity, including a $20 billion at-the-market stock offering.
The spending spree comes as Oracle races to build AI-ready infrastructure. Its massive “Stargate” data center in Texas—being developed alongside OpenAI and others—will be over 75% complete within 90 days, and OpenAI’s latest coding models will be available there. Oracle CEO Clay Magouyrk said the company is on pace to deliver one gigawatt of capacity in the next quarter, roughly matching what it built in the past year.
On a call with analysts, CFO Hilary Maxson broke down the numbers: $70 billion of Oracle’s own spending plus $20–25 billion in customer-funded projects. She didn’t specify when that money will come back in, but stressed that analysts had underestimated Oracle’s outlay. She also warned gross margins will dip as the company plows more cash into its data-center pipeline.
Oracle’s backlog of performance obligations—future revenue under contract—hit $638 billion, topping analyst forecasts of $592.5 billion. Despite the hit to its shares (they fell 8.9% in after-hours trading), the company is betting that these investments will position it as a serious challenger to Amazon Web Services and Microsoft Azure in the AI cloud market.