The software giant Oracle (NYSE: ORCL) has just endured its worst week on Wall Street in 25 years, as concerns intensify over the company's debt load and whether its all-in bet on artificial intelligence will pay off.
The stock plummeted 19% this week, falling at least 2.6% in each of the past five trading sessions. This marks its largest weekly decline since a 20% drop in August 2001, during the depths of the internet bubble burst.
The Cruel Nine Months
The past nine months have been brutal for Oracle investors. After its market capitalization peaked near $900 billion last September amid initial market enthusiasm for its AI clients, the share price has now shed roughly 55%. The core issue lies in the record levels of debt Oracle has had to raise to fulfill its AI infrastructure commitments—primarily to OpenAI—introducing balance sheet risk while the company focuses on lower-margin supply.
As of the end of May, Oracle carried approximately $130 billion in debt, with its fiscal 2026 capital expenditures soaring 162% to nearly $56 billion. The company is racing to open data centers alongside cloud giants Amazon, Microsoft, and Google but cannot sell a complete technology stack like its rivals can.
Strained Finances
Oracle reported negative free cash flow of close to $24 billion in its most recent fiscal year. Earlier this month, the company stated that for fiscal 2027, it plans to raise $40 billion through debt and equity financing, including a previously announced $20 billion share sale. In the last fiscal year, it had already raised $43 billion through debt sales and $5 billion via equity issuance.
Analysts from Evercore wrote in a Wednesday report, "We expect funding/leverage and the pace of equity issuance to remain central investor debates in the near term despite strong demand signals." These analysts maintained a buy rating on the stock.
Analyst Sentiment
Like Evercore, most institutions remain optimistic about Oracle's outlook despite growing investor apprehension. According to FactSet data, 71% of analysts recommend buying the stock, the highest proportion in 15 years.
Market Headwinds
Oracle is facing multiple market headwinds. Beyond its massive capital requirements, software stocks are being sold off as investors fear AI models will replace many functions of software company products, dragging Oracle's price lower. The iShares Expanded Tech-Software Sector ETF (IGV) is down 16% year-to-date, while Oracle has fallen 24%.
In its annual report released last week, Oracle disclosed a 13% reduction in its workforce for fiscal 2026 to 141,000 employees, with particularly notable cuts in sales and marketing.
Leadership and Wealth
Oracle co-founder Larry Ellison was absent from this month's earnings call, with dual CEOs Clay Magurk and Mike Sicilia and newly appointed finance chief Hillary Maxson fielding questions. "Hillary is under a lot of pressure," Magurk said during the call.
Due to Oracle's share price decline, Ellison has been surpassed on the global rich list by Google co-founders Larry Page and Sergey Brin, Amazon founder Jeff Bezos, and Michael Dell. Ellison's net worth remains above $200 billion.
Future Plans
Oracle is advancing its construction plans, targeting data center builds in Michigan, New Mexico, and Texas by 2027. "While pursuing these opportunities, we will continue to focus on disciplined capital allocation, maintaining a strong balance sheet, and preserving our investment-grade credit rating," Maxson stated during this month's earnings call.
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