Larry Ellison’s Oracle is stumbling into the end of the year with its shares taking a beating.
The tech firm’s stock has plummeted 30% so far this quarter, CNBC noted Friday.
Only four trading days remain — and the stock is staring down its steepest drop since the 2001 aftermath of the dot-com meltdown.
Wall Street is losing faith in Oracle’s capacity to crank out new server farms for OpenAI, even after the artificial intelligence giant agreed to spend over $300 billion with the tech firm.
Earlier this month, Oracle reported weaker-than-expected quarterly revenue and free cash flow, and on the earnings call, newly appointed finance boss Doug Kehring called for $50 billion in fiscal 2026 capital expenditures — 43% higher than the plan in September and double the total from a year earlier.
Additionally, Oracle is plotting $248 billion in leases to boost cloud capacity, on top of building data centers, CNBC reported.
That kind of growth won’t come cheap — it’ll take boatloads of debt.
Oracle piled on $18B in a jumbo bond sale in September, one of the biggest ever in the tech industry. Top brass vowed to protect the company’s investment-grade rating, but wary investors aren’t buying it, driving up the cost of insuring Oracle’s debt.
“Considering Oracle is already barely hanging on to an investment grade rating, we would be concerned about Oracle’s ability to live up to these obligations without restructuring its OpenAI contract,” analysts at D.A. Davidson wrote in a note to clients on Dec. 12.
They have the equivalent of a hold rating on the stock.
Oracle did not comment.
This comes just months after Oracle named Clay Magouyrk and Mike Sicilia as its new CEOs, replacing Safra Catz, who was instrumental in shaping the company’s cloud strategy and thrusting it to the forefront of the ongoing AI boom with big contract wins.
Just two weeks before the transition, Oracle reported about a jaw-dropping 359% surge in revenue backlog tied heavily to OpenAI’s blockbuster commitment.
When news of the OpenAI pact broke on Sept. 10, Oracle stock went into overdrive, rocketing nearly 36% — the third-biggest rally since its 1986 IPO — and hitting an intraday record of $345.72 per share.
“We think $340 was terrifying,” said Zachary Lountzis, vice president at Lountzis Asset Management, told CNBC.
The firm held $25 million in Oracle shares as of Sept. 30, according to a filing.
Lountzis’s fear proved prescient.
Oracle shares subsequently cratered 43%, closing Wednesday at $197.49 — though the stock caught a brief bump last Friday after TikTok agreed to sell part of its US business to Oracle and other investors. Oracle has long provided cloud services to the social media giant.
“Our philosophy is that we’re OK with short-term overvaluation if the economics of the business have not changed, and that was the case with Oracle,” Lountzis said.
“We didn’t feel the economics of the business changed with all the largely positive news that came out. And I think what we’ve seen from $340 down to $180 is actually a very healthy correction.”
For Lountzis, much of his trust in Oracle comes down to Larry Ellison, who founded the company in 1977 and is now the world’s second-richest person, according to Bloomberg.
“You would have gone bankrupt 40 times betting against Larry over the last 50 years,” Lountzis said. “He sees the future.”
Others on Wall Street are not so sure.
That’s despite the new execs’ long-term vision for stronger growth in the next four to five years, with revenue set to step up to $225 billion in the 2030 fiscal year from $57 billion in fiscal 2025.
Eric Lynch, managing director at Florida’s Suncoast Equity Management, said it’s hard as an investor to get comfortable with Oracle’s plans. The company said much of its projected growth will come from artificial intelligence infrastructure, with Nvidia’s graphics processing units at the center of it.
“Four or five years is a long time,” Lynch said. “That’s just not within our investment discipline.”
Lynch added that he’s concerned about such heavy dependance on OpenAI, which is burning cash at a rapid rate and has committed to more than $1.4 trillion in total AI build-outs and investments.
“Will the demand be there from OpenAI?” Lynch said.
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