Oracle's Debt-Fueled Expansion Weighs on Investor Sentiment

Oracle US68389X1054

Oracle Corporation's equity continues to face significant downward pressure, driven by a combination of legal challenges, analyst downgrades, and mounting concerns over its aggressive financial strategy. Despite securing a substantial government contract, the market's focus remains fixed on the company's growing debt burden.

A securities class action lawsuit was filed against Oracle on February 17, 2026, in the U.S. District Court for Delaware by the law firm Kessler Topaz Meltzer & Check. The suit is on behalf of investors who purchased the company's stock between June 12 and December 16, 2025. It alleges that Oracle misled the investment community regarding the true capital expenditures required for its artificial intelligence infrastructure and the projected returns from these investments.

This legal action points to Oracle's quarterly report, which disclosed an additional $248 billion in lease obligations linked to data centers and cloud capacity?a revelation described as "explosive" by the plaintiffs. The lead plaintiff deadline is set for April 6, 2026.

The news compounds existing market unease. Oracle's shares declined approximately 4.3% on Monday, closing near $153.21 after trading as high as $159.19 during the session. The stock has been highly volatile, with a 52-week range between $118.86 and $345.72. For February alone, the cumulative loss stands at roughly 17%.

Analyst Downgrades Highlight Competitive and Financial Pressures

Shifting analyst perspectives reflect growing skepticism. On February 9, 2026, Melius Research downgraded Oracle from a "Buy" to a "Hold" rating. While maintaining a $160 price target, the firm cited increasing competitive pressures in the AI sector as a key reason for the change.

In contrast, Sanford C. Bernstein maintains a much higher target of $313 per share. However, their analysis also notes that Oracle's planned capital raise could pose a significant burden, tempering outright optimism.

The Debt Engine Behind AI Ambitions

Central to investor concern is Oracle's financing strategy for its massive expansion. The Impax US Sustainable Economy Fund highlighted in its Q4 2025 investor letter that Oracle is taking on "excessive debt" to fund the build-out of data centers for artificial intelligence, including infrastructure for a partnership with OpenAI.

In early February 2026, the company announced its intention to raise between $45 and $50 billion in gross capital during the current year. These funds are earmarked for additional data center capacity to serve major cloud clients such as Nvidia, Meta, OpenAI, AMD, TikTok, and xAI.

The strategy represents a high-stakes bet. The market's reaction has been decidedly cautious, questioning whether the substantial investments will generate the anticipated returns. A pivotal moment cited in the lawsuit was December 2025, when Oracle's quarterly investment volume significantly exceeded estimates, resulting in a negative free cash flow with an outflow surpassing $10 billion.

A Silver Lining in Government Business

Amid the challenges, Oracle secured a positive development. The U.S. Air Force awarded the company an $88 million fixed-price contract. This deal provides near-term revenue support and demonstrates continued reliance on Oracle's cloud infrastructure by government agencies.

Nevertheless, the overarching narrative for Oracle remains dominated by its debt-financed growth plan. The ambitious attempt to capture a leading position in the AI infrastructure race is being funded by a considerable increase in leverage, leaving shareholders to weigh the potential long-term rewards against the immediate financial risks and legal overhang.