Oracle stock on pace for worst quarter since 2001, AI concerns

Three months ago Oracle named Clay Magouyrk and Mike Sicilia as its new CEOs. They’re off to a rough start.

Oracle shares have plummeted 30% so far this quarter. With four trading days remaining in the period, the stock is on pace for its sharpest decline since 2001 and the dot-com bust.

Investors have grown skeptical about the database software vendor’s ability to open more server farms for ChatGPT operator OpenAI, which agreed in September to spend over $300 billion with Oracle.

Earlier this month, Oracle reported weaker-than-expected quarterly revenue and free cash flow. On the earnings call, newly appointed finance leader 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.

Such growth will require boatloads of debt. In September, Oracle raised $18 billion in a jumbo bond sale, one of the largest debt issuances on record in the tech industry. Kehring committed on the earnings call to keeping Oracle’s investment-grade debt rating. But some skeptical investors are betting otherwise, pushing up the prices of Oracle’s credit default swaps.

“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 DA Davidson wrote in a note to clients on Dec. 12. They have the equivalent of a hold rating on the stock.

Oracle declined to comment.

Magouyrk and Sicilia’s tenure began at a time of historic optimism.

About two weeks before they took the reins from Safra Catz, Oracle reported a 359% revenue backlog tied heavily to OpenAI’s commitment. The deal that represented a major endorsement for Oracle, which was left off Gartner’s list of top five cloud infrastructure providers by revenue for 2024.

Following reports about the OpenAI agreement on Sept. 10, Oracle’s stock shot up almost 36%, the third-sharpest rally since the company’s 1986 IPO. Shares reached an intraday record of $345.72.

“We think $340 was terrifying,” said Zachary Lountzis, vice president at Lountzis Asset Management, in an interview. Lountzis held $25 million in Oracle shares as of Sept. 30, according to a filing.

The stock has since lost 43% of its value, closing on Wednesday at $197.49, though it got a bump last Friday after TikTok said it had agreed to sell part of its U.S. business to Oracle and other investors. Oracle has for years delivered cloud services to TikTok.