Shares of cloud computing firm Oracle (ORCL) climbed nearly 4% in Monday's premarket trading, attempting to stage a recovery from its most dismal weekly performance since 2001 recorded last week. The stock slumped 19% last week, falling more than 2.6% for five consecutive sessions, marking its largest weekly decline since the dot-com bubble era.
Focus on Financial Leverage
The core of market concern centers on the heavy debt burden Oracle is carrying to fulfill its artificial intelligence infrastructure commitments. As of the end of May, the company's total liabilities stood at approximately $130 billion. Capital expenditures for fiscal 2026 surged by 162% to nearly $56 billion, while free cash flow was negative $24 billion. To continue funding AI data center construction, the company plans to raise $40 billion through debt and equity financing in fiscal 2027, which includes a previously announced $20 billion stock issuance.
Underlying Business Strength
Despite the financial pressure, Oracle's underlying fundamentals provide support. The company's latest earnings report showed fourth-quarter revenue reached $19.2 billion. Its cloud infrastructure business grew by 93%, and remaining performance obligations skyrocketed to $638 billion, a 363% year-over-year increase, with the majority stemming from large AI-related contracts. Most institutions remain optimistic about Oracle's long-term prospects, with 71% of analysts currently recommending a buy on the stock, the highest proportion in nearly 15 years.
Market Outlook and Targets
Analysts note that even with strong demand signals, near-term investor discussion will likely remain focused on financing leverage and the pace of capital raising. Oracle is expanding its data centers in sync with cloud giants like Amazon and Microsoft. The company has reaffirmed its fiscal 2027 revenue target of $90 billion and raised its adjusted earnings per share forecast to $8.05.
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