Oracle investors have questions about that spending.
The software giant reported quarterly results Wednesday that missed Wall Street's revenue expectations, and its stock price fell more than 11% in after-hours trading.
“Capex and cash needs have been the biggest question for investors over the past two months, weighing on stock prices,” TD Cowen analyst Derrick Wood said ahead of the earnings call.
In a call with investors Wednesday, Oracle co-CEO Clay Magouyrk reassured analysts that the company's debt remains “investment grade” and that the company is in a unique business segment that warrants optimism.
“We have read a number of analyst reports, and we have read quite a few that indicate an expectation that Oracle will need more than $100 billion in capital to complete these enhancements. And based on what we know now, we expect that the capital required to fund this enhancement will be less, if not significantly less, than that amount.”
Toward the end of the call, a Guggenheim Securities analyst asked why Oracle was so optimistic about accelerating growth when most software services companies are facing slowing growth, and Magouik replied that Oracle is “the only applications company in the world that sells a complete suite of applications” with added AI.
Despite the decline in sales, Oracle still posted 14% year-over-year sales growth in the quarter that ended Nov. 30. Earnings per share also exceeded expectations at $2.26, compared to expectations of $1.64. Net income was $6.14 billion, a significant increase from $3.15 billion in the same period last year.
The decline comes as Oracle leans heavily into the AI craze and bets heavily on massive data center expansions to capture more business.
Oracle surprised Wall Street in its September earnings report with a surge in cloud bookings related to AI workloads, a boom that sent the stock to an all-time high. However, the rally did not last. Since then, the stock has fallen by about a third as investors have grown wary of the huge sums of money needed to continue building data centers and whether Oracle's biggest customer, OpenAI, can actually deliver on its multibillion-dollar cloud commitments.
