Oracle Stumbles: Shares Plummet 15% on Disappointing Results

Oracle's stock crashed 15% on Thursday, wiping out more than $100 billion in market value after the company's massive spending on AI data centers failed to translate into expected cloud revenue growth. The database giant's capital expenditures jumped to $12 billion in the second quarter, far above analyst expectations of $8.25 billion, while cloud sales growth disappointed investors.

This marks Oracle's biggest single-day drop since January. At one point during trading, the stock was close to recording its worst daily decline since 2001. The company's credit risk index also hit its highest level in 16 years, signaling growing investor concern about Oracle's financial health.

The spending surge reflects Oracle's aggressive push into AI infrastructure. Capital expenditures soared from $8.5 billion in the previous quarter to $12 billion as the company builds out data centers to support artificial intelligence applications. But this investment hasn't yet paid off in revenue terms.

Cloud services revenue grew 34% to $7.98 billion in the second quarter, while infrastructure revenue jumped 68% to $4.08 billion. Both numbers came in slightly below what analysts had expected, disappointing investors who were hoping for stronger returns on Oracle's heavy infrastructure investments.

The results represent a sharp reversal for Oracle, which just months ago was riding high on AI optimism. The company had secured billion-dollar data center deals with companies like OpenAI, and the stock surge briefly made co-founder Larry Ellison the world's richest person, surpassing Elon Musk for a few hours.

Oracle has been trying to catch up in the competitive cloud computing market, where it trails Amazon, Microsoft, and Google. The company is betting big on AI workloads, expanding data centers to serve OpenAI's applications and landing major clients like TikTok's parent company ByteDance and Meta.

There are some positive signs buried in the numbers. Total remaining commitments, which indicate future bookings, jumped more than five-fold to $523 billion in the quarter ending November 30. That slightly beat analyst estimates of $519 billion, suggesting strong demand for Oracle's services down the road.

But investors are clearly worried about the timing mismatch between Oracle's massive upfront spending and when that investment will generate profits. Building AI data centers requires enormous capital, and it can take quarters or even years before that infrastructure translates into meaningful revenue growth. For now, Oracle is spending fast and waiting for the returns to follow.