The substantial capital expenditures highlight the high costs behind the AI boom.
Oracle has reaffirmed its revenue target of $90 billion for the 2027 fiscal year.
Shares of the cloud computing and software giant Oracle were lower in pre-market trading. While the company reported increases in both current profit and total revenue, significant capital expenditures related to its large-scale infrastructure expansion raised market concerns.
Oracle disclosed that capital expenditures for the recently completed full fiscal year reached $55.7 billion, approximately $5 billion higher than analyst expectations. The company's Chief Financial Officer, Hillary Mackson, indicated that net cash capital expenditures for the 2027 fiscal year are projected to be around $70 billion.
In Thursday's pre-market session, shares of Oracle fell sharply by 7%.
This enormous level of investment directly reflects the immense cost pressures associated with the expansion of the artificial intelligence industry.
It has been reported that Oracle emerged as a popular player in the AI field last year, securing hundreds of billions of dollars in AI-related business orders, including a five-year, roughly $300 billion computing power procurement deal with OpenAI.
However, investors are now questioning whether major technology giants can sustain such high levels of AI capital investment over the long term.
Oracle acknowledged that the massive financing required for data center expansion will continue to pressure the company's profit margins.
Co-Chief Executive Officer Clay Magourk stated on an analyst conference call that the earnings report released on Wednesday showed cloud revenue surged 47% year-over-year to $9.9 billion, indicating strong market demand for AI computing power.
"The scale of the AI infrastructure market dwarfs the traditional cloud infrastructure market. All data suggests this market could reach an annual size of trillions of dollars," Magourk said.
Chief Financial Officer Mackson added, "Infrastructure investments will temporarily suppress the gross margin of the cloud infrastructure business, but as revenue from data center contracts is fully realized, the infrastructure segment's margin is expected to recover quickly."
Simultaneously, Oracle indicated that the scale of financing required for future data center expansions may decrease, as more customers are opting to prepay for GPU computing power or provide their own hardware equipment.
In addition to a previously announced $20 billion at-the-market equity offering program, Oracle expects to raise approximately another $20 billion this fiscal year through debt and equity channels.
Earnings data showed the company's fourth-quarter net profit was $4.3 billion, compared to $3.4 billion in the same period last year. Total quarterly revenue reached $19.2 billion, a 21% increase year-over-year, surpassing market expectations of $19.1 billion. Revenue from the traditional software business was $6.8 billion, down 2% year-over-year, which the company attributed to enterprise customers gradually migrating on-premise software to the cloud.
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