Oracle stock jolts as AI spending rockets, debt climbs, and investors reassess the risk-reward. Shares dropped about 10 to 13 percent after the fiscal Q2 report. The move came despite a headline EPS beat, as the market focused on a revenue miss and a huge jump in capital spending.
By midday, trading steadied near the 223 dollar mark. The dust is not settled. This is a fight between bold strategy and balance sheet strain, and it is playing out in real time.
What moved Oracle stock today
Oracle posted revenue of 16.06 billion dollars. That was up 14 percent from a year ago, but a touch below the 16.21 billion dollars many expected. Adjusted EPS landed at 2.26 dollars. That beat, but it leaned on a 2.7 billion dollar gain from selling an Ampere stake. It helps cash, but it is not repeatable.
The bigger shock was spending. Management lifted full year capital spending plans to about 50 billion dollars. About 15 billion dollars is set for new AI data centers. That is a mega bet on demand from large AI customers.
Oracle’s contracted backlog jumped to about 523 billion dollars. That is massive revenue visibility, but it must be delivered on time and at scale.
The backlog, also called Remaining Performance Obligations, surged roughly 438 percent from last year. That leap tracks big multi year deals with major AI players. Still, long term debt climbed about 25 percent to 99.9 billion dollars. The market read that as higher execution and financing risk.
The AI build, and the ripple effects
Oracle is scaling its AI cloud capacity fast. It plans to deploy 50,000 AMD Instinct MI450 GPUs in 2026. That signals a wider supplier base for Oracle. It also nudges pressure onto Nvidia and other AI linked names, since wallet share can shift when orders move.
The strategy is clear. Lock in huge contracts now, then build the muscle to fulfill them. If demand holds and delivery is smooth, Oracle grows into a larger AI infrastructure role. If projects slip or costs swell, returns fall and debt weighs heavier. This is the knife edge.
High spending into a rising rate world can pinch free cash flow. Delays, supply snags, or slower customer ramps would compound that risk.
Balance sheet reality, cost of capital, and cash flow
Debt near 100 billion dollars gives Oracle firepower, but also a bill to pay. Interest costs matter more when rates stay high. The EPS beat, helped by an asset sale, does not fix that. What does fix it is recurring cash from that huge backlog, steady margins, and on time data center launches.
Revenue growth at 14 percent is fine. The miss versus expectations is what hurt. It raised the bar for proof. The market wants to see backlog turning into billed revenue, then into cash, quarter after quarter. Oracle now has to execute, quarter after quarter.
Market and economic implications
This is bigger than one stock. Oracle’s sudden capex surge points to a second wave of AI infrastructure spend. It could lift parts of the chip, power, and data center supply chains. It also tests the credit markets. Funding large builds needs stable access to capital at fair rates.
The cross current is real. Large AI customers need capacity now. Providers like Oracle are racing to meet it. If demand is broad and sticky, the whole ecosystem benefits. If demand is concentrated and lumpy, volatility rises across cloud, semis, and power.
Investment view, near term and beyond
This selloff is about trust. Investors are asking if Oracle can turn a record backlog into clean cash returns, without stressing the balance sheet. The answer will come from execution, not promises.
Here is what I am watching next:
- Backlog conversion to revenue, especially from top customers
- Free cash flow after capex, trend direction matters
- Unit economics of new data centers, capacity utilization and pricing
- Debt maturities and interest expense, any refinancing updates
- Proof points on the AMD GPU rollout timing in 2026
Focus on cash, not just EPS. Free cash flow coverage of interest and capex will tell the real story.
Frequently Asked Questions
Why did Oracle stock drop if EPS beat?
The beat leaned on a one time gain. Revenue missed expectations, and spending jumped a lot. Investors shifted focus to debt and execution risk.
What is RPO and why does it matter?
RPO is contracted future revenue. It shows demand is booked. It matters because it can convert into revenue and cash if Oracle delivers on time.
Is the AI spending plan too aggressive?
It is bold. At about 50 billion dollars for the year, it tests balance sheet strength. Returns depend on timely builds, high utilization, and stable pricing.
What does the AMD GPU order mean?
Oracle plans to deploy 50,000 AMD MI450 GPUs in 2026. It diversifies supply and could curb reliance on Nvidia. It also sends a message about competition among chip vendors.
What should investors watch next quarter?
Watch cash flow, capex cadence, backlog conversion, and any updates on debt and data center timelines. Those are the key proof points.
Oracle just made the biggest AI bet in its history. The backlog is huge, and so are the stakes. If execution matches ambition, this pullback will look like opportunity. If not, today’s slide may be the market’s warning shot.
