By Kanishka Ajmera and Jaspreet Singh
June 11 (Reuters) - Oracle shares tumbled 12% on Thursday as surging spending and a ballooning debt load fanned investor concerns about the cash burn in the company's push to build out AI infrastructure.
If the losses persist, the stock would log its biggest one-day drop since January last year, wiping off around $72 billion from the company's $578.83 billion market value.
A smaller player in the cloud-computing industry for a long time, Oracle has in recent months
seized massive data-center deals with OpenAI and Meta to compete more forcefully with rivals, such as Amazon and Microsoft.
But Oracle lacks the large cash flows that have primarily funded the tech giants' outlays, forcing it to burn cash and sell debt instruments at a time its traditional software business is under pressure from the very AI tools it plans to support through its cloud.
"Oracle's accelerated data center buildout is pressuring near-term gross margins and raising investor questions around CapEx, funding, and returns," Citizens JMP Securities said.
The company said it expects net capital expenditure of around $70 billion in its current fiscal year, as it accelerates AI data center development for customers, including OpenAI.
To fund that, it will raise another $40 billion in debt and equity, including a previously announced $20 billion stock issuance. It raised $43 billion in debt financing and $5 billion in equity in the fiscal year ended May.
"It is hard to know if Oracle can stick to this capex plan if incremental business arises from the likes of OpenAI and Anthropic. Also, its competitors are unlikely to slow spending and could use Oracle's spending moderation as the means to gain share," said Melius Research analysts.
Morgan Stanley expects AI-related global debt issuance to more than double to nearly $570 billion in 2026, and hyperscaler spending to exceed $1 trillion by 2027.
Oracle's higher-than-expected capital spending for the fiscal year 2026 further deepened its free cash flow deficit to $23.7 billion, a significant rise from a deficit of $394 million in fiscal 2025.
The company, which also faces fierce competition from AI cloud providers such as CoreWeave, trades at 24.56 times its estimated earnings for the next 12 months, compared with Microsoft's 20.47 times and Amazon's 25.19, according to LSEG-compiled data.
Its stock drop also weighed on the European IT sector, which was already under pressure following a downgrade by UBS Global Wealth Management. Shares of SAP tumbled 4.4%, while Capgemini slid 3.6%.
(Reporting by Kanishka Ajmera and Jaspreet Singh in Bengaluru; Editing by Anil D'Silva and Shinjini Ganguli)
