Oracle Shares Plunge Amid Capital Expenditure Concerns

Oracle US68389X1054

A significant sell-off hit Oracle on Wall Street, with the company's stock closing Friday's session down 4.47% at $189.97. In after-hours trading, the decline deepened, pushing shares to $188.13. This movement extends a dramatic retreat of approximately 45% from the stock's peak last September. Market sentiment has been rattled by the firm's soaring investments in artificial intelligence infrastructure and growing uncertainty surrounding its data center construction timelines.

The core driver of investor anxiety is a sharp and unexpected rise in planned capital spending. For its second fiscal quarter of 2026, Oracle reported capital expenditures (capex) of $12 billion, a figure that substantially exceeded analyst projections of $8.25 billion. Consequently, company leadership has revised its full-year capex guidance upward to $50 billion, marking a $15 billion increase over prior plans.

This aggressive investment strategy is raising pointed questions about future free cash flow, especially given Oracle's existing debt burden, which stands near $100 billion. The market's perception of credit risk has also shifted, evidenced by the widening of Oracle's credit default swaps to 126 basis points.

Data Center Delays Fuel Skepticism

Further pressure emerged from a Bloomberg report suggesting Oracle has pushed back the completion date for certain data centers earmarked for OpenAI from 2027 to 2028. These facilities are part of a purported $300 billion partnership between the entities. On December 12, Oracle publicly refuted claims of a delay, stating the projects remain "on schedule." Despite this denial, the market reaction was decidedly skeptical. The episode has intensified broader doubts about whether the physical realities of the AI boom—including potential shortages in labor and materials—are beginning to impose constraints.

Analyst Community Delivers Mixed Verdicts

In response to the developments, several prominent financial institutions have slashed their price targets for Oracle equity. Goldman Sachs reduced its target from $320 to $220, while BMO Capital Markets cut its forecast from $355 to $270, albeit while maintaining an "Outperform" rating. In contrast, Guggenheim analyst John DiFucci stands out with a notably bullish $400 price target, implying potential upside of over 100%. The current average analyst price target sits around $301, with many market experts viewing the recent sell-off as an overreaction.

Institutional Investors Show Divergent Strategies

The reaction among major institutional holders has been mixed, reflecting the uncertain outlook. EP Wealth Advisors increased its stake by 10.5% in Q2 2025, bringing its holding to 129,618 shares. Engineers Gate Manager executed a far more aggressive accumulation, boosting its position by 321.6% to 90,717 shares. On the other side, British Columbia Investment Management Corporation reduced its exposure by 16.8%. Collectively, institutional investors control roughly 42.44% of Oracle's outstanding shares.

Strong Operational Performance Persists

Amid the capital markets turmoil, Oracle's underlying business continues to demonstrate strength. Second-quarter revenue climbed 14.2% year-over-year to $16.06 billion. Earnings per share also outperformed, coming in at $2.26 against market expectations. The pivotal question for investors now is whether the multi-billion dollar bet on AI infrastructure will eventually yield the promised returns, or if the mounting debt load will continue to weigh heavily on the company's valuation.