Mounting Debt and Legal Challenges Weigh on Oracle’s Stock

Oracle US68389X1054

Oracle Corporation finds itself navigating turbulent waters as a combination of legal action, escalating debt concerns, and scrutiny over its artificial intelligence strategy pressures its share price. The stock has shed nearly half its value since reaching a peak in September 2025, including a decline of approximately 6% this week alone.

A significant factor in the recent sell-off is a class-action lawsuit filed in a New York court. The Ohio Carpenters' Pension Plan alleges that Oracle misled bond investors regarding the capital requirements for its AI expansion.

The legal complaint centers on a bond issuance worth roughly $18 billion at the end of September. This fundraising occurred just weeks after Oracle announced a potentially $300 billion five-year contract with OpenAI. Plaintiffs argue the company failed to adequately disclose how much additional debt would be necessary to fulfill such substantial commitments.

Key allegations from bondholders include:
* Inadequate transparency regarding future financing needs.
* Insufficient disclosure of costs associated with AI infrastructure build-out.
* Elevated risk of rising capital costs within a high-interest-rate environment.

Diverging Estimates on Future Capital Requirements

The lawsuit has intensified focus on Oracle's balance sheet. Analyst projections for the company's future funding needs vary widely:
* BNP Paribas estimates an additional $25 to $30 billion will be required.
* Other market researchers warn the total need could reach $70 billion by 2026.
* In a climate of persistently higher interest rates, the associated debt-servicing costs would also rise significantly.

Oracle currently reports a debt-to-equity ratio of 0.24 and a cash ratio of 0.1. Metrics once viewed as signs of a solid financial foundation are now being reassessed more critically.

Free Cash Flow Turns Deeply Negative

Operationally, Oracle's performance remains robust. Quarterly revenue grew 14% year-over-year, with cloud services and application revenue advancing more than 30%. However, the company's free cash flow has deteriorated sharply, turning negative to the tune of over $13 billion.

This presents a growing problem for investors. In the current market climate, growth alone is insufficient. Without a clear path to generating liquidity and stabilizing its balance sheet, justifying a premium valuation becomes increasingly difficult.

Broader Trade Policy Adds to Sector Pressure

Announced U.S. tariffs on European imports further cloud the outlook. Import duties of 10% are set to take effect on February 1, with the potential for these to rise to 25% should negotiations concerning Greenland fail. This policy uncertainty is causing unease across the broader technology sector.

Bullish Case Hinges on OpenAI Partnership

Despite the headwinds, some analysts maintain a positive outlook. Guggenheim analyst John DiFucci has named Oracle his top recommendation for 2026, reiterating a price target of $400—more than double the current trading level.

DiFucci forecasts Oracle's revenue will surge to $228 billion by 2030, up from an estimated $67 billion in 2026. He contends the company's "Bring-Your-Own-Chip" model could cap the actual capital requirement below $100 billion, as customers would contribute their own GPUs. OpenAI currently represents about 60% of Oracle's remaining performance obligations, equating to approximately $315 billion in future business. DiFucci projects revenue from the OpenAI partnership will grow from $3.6 billion in fiscal 2026 to $62.4 billion by 2030.

Technical Analysis Points to Continued Weakness

From a chart perspective, Oracle's shares are trading well below key moving averages at €165.90. This price represents a decline of roughly 49% from the 52-week high of €280.70 reached in September. A sustained break below current support levels would shift focus toward the €150 mark, with a potential retreat toward the April lows near €111 remaining a risk in a more extreme scenario.