Oracle’s AI Ambitions Face Funding Hurdle

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Oracle's aggressive push into artificial intelligence infrastructure is encountering investor skepticism, as concerns over its financing strategy overshadow robust quarterly earnings. The core issue centers on whether the company can sustain its massive capital expenditure program without over-leveraging its balance sheet.

On December 10, Oracle reported impressive results for its second fiscal quarter of 2026, demonstrating significant growth in its cloud segment. However, these figures have done little to alleviate market worries about the substantial upfront investments required.

Key financial highlights from the report include:
* Revenue: $16.1 billion, a 14% year-over-year increase.
* Adjusted Earnings Per Share (Non-GAAP EPS): $2.26, up 54%.
* Cloud Revenue: $8.0 billion, growing at 34%.
* Remaining Performance Obligations (RPO): $523 billion, a staggering increase of 438%.

The explosive growth in RPO underscores intense demand for Oracle's services. Yet, it also creates a financial tension: while contracts are signed, revenue is recognized gradually over time. This dynamic shifts market focus from top-line growth to the heavy capital outlays needed to build the infrastructure to fulfill these long-term commitments.

A Key Financing Deal Unravels

Market unease intensified following reports on December 17, 2025, that Blue Owl Capital withdrew from negotiations to provide approximately $10 billion in financing. This capital was intended for a 1-gigawatt data center project in Michigan, specifically designed to meet the computational needs of OpenAI.

Blue Owl had been viewed as a key partner for Oracle's real estate projects. While Oracle management maintains the Michigan site remains "on plan" and claims to have already secured an alternative equity partner, the market reaction was negative. Shares fell sharply in the subsequent session. The stock now trades at €152.00, approximately 46% below its 52-week high and down over 10% in the past seven days. This sell-off reflects growing investor scrutiny of the risks associated with Oracle's capital-intensive AI expansion.

Debt, Capex, and Rising Capital Costs

The collapsed deal with Blue Owl brings Oracle's balance sheet strength into sharper focus. The company is in the midst of a vast infrastructure build-out to compete with larger hyperscale cloud providers, a program requiring tens of billions in investment.

Market analysts note that Oracle is relying heavily on debt to fund this expansion, while some competitors can draw on larger cash reserves. The company's debt metrics are rising, and the terminated Blue Owl discussions are interpreted as a sign that financing terms are becoming more demanding. Reports indicate Oracle's bonds are trading with risk premiums higher than what its official investment-grade rating would typically suggest.

This situation highlights a dual challenge: Oracle must not only execute its AI strategy operationally but also manage a capital structure that is attracting increasing market sensitivity.

Technical Weakness and the Path Forward

From a chart perspective, Oracle's shares are firmly in a corrective phase. A brief rally following the Q2 earnings release quickly faded. The stock currently trades roughly 23% below its 50-day moving average and nearly 19% below its 200-day line, indicating damaged short-term momentum. A 30-day volatility reading of approximately 53% points to a nervous trading environment.

The coming weeks will be critical for Oracle. The company must demonstrate its ability to finalize the Michigan deal and structure similar projects with alternative partners without significantly increasing its debt load. Only when a new financing partner is officially named and the investment program is clearly funded will investor attention likely shift back from balance sheet risks to the company's strong operational growth profile.