Oracle shares plunged 15.8% after the company's Q3 revenue and earnings guidance missed market expectations, coupled with a significant increase in capital spending. Investor concerns over AI and cloud investments led to the worst single-day drop since March 2001.
Oracle Corp. shares plunged 15.8% on Thursday, marking their worst single-day drop since March 2001, following disappointing third-quarter earnings guidance and a sharp increase in projected capital spending. Investor sentiment soured as the company's revenue forecast fell short of market expectations, raising concerns about the sustainability of its aggressive AI and cloud investments.
Notable Updates
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Oracle's Q3 revenue growth is now projected at 16%–18%, below the consensus estimate of 19.4%.
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The company raised its capital expenditure forecast by $15 billion, pushing expected spending to around $50 billion for fiscal 2026, primarily for AI data centers.
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Adjusted earnings guidance of $1.64–$1.68 per share missed the analyst consensus of $1.72.
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Free cash flow for the November quarter turned sharply negative, reaching approximately $10 billion—much worse than the anticipated $5.2 billion.
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Major brokerage firms have revised their price targets downward, with some cutting targets by as much as $100.
Major Takeaways
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Despite a strong backlog and cloud contract wins, Oracle’s aggressive spending and weaker-than-expected guidance have spooked investors.
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The stock’s sharp decline reflects broader market concerns about the pace of returns from AI and cloud infrastructure investments.
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Oracle’s CEO and CFO have attempted to reassure investors, emphasizing funding flexibility and “chip neutrality” as strategies to manage costs.
Important Points
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Oracle’s cloud infrastructure revenue continues to grow, but margins and cash flow remain under pressure.
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The company’s heavy reliance on a few major AI clients adds to investor caution.
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The outlook remains challenging as Oracle balances ambitious growth with financial sustainability.
Source: Economic Times, Bloomberg, CNBC, Reuters, Financial Express