The tech firm's lackluster quarterly results have wiped over $seventy billion dollars from the worth of the software and data company established by billionaire Larry Ellison, adding to escalating fears of a speculative bubble in AI-related stocks.
Steep Stock Fall Comes After Revenue Shortfall
Shares in the firm tumbled by 11.5% in after-hours trading after it reported a disappointing fourteen percent growth in sales to $16bn in the previous quarter, as it simultaneously announced plans to ramp up its AI spending by about $15 billion.
The enterprise reported disappointing quarterly revenues for the quarter ending in November, with sales at its core cloud computing business expanding at a more modest rate than forecast, at 34 percent.
Investor Concerns Over Spending and Leverage
Investors were also let down by a slower than expected sixty-eight percent growth in income from its infrastructure business.
Concurrently, the market were spooked by the company's raised forecasts for AI investment. It now expects capex to surge by 40% to $50 billion, with the bulk of the increase allocated for constructing data centres.
This substantial investment strategy comes amid a ballooning debt load, with Oracle's long-term debt having jumped by twenty-five percent over the last twelve months to reach $99.9 billion.
"Frankly, the earnings release was not dramatically bad, but it came to confirm concerns around substantial AI spending, financed by debt, with an uncertain timeframe for revenue generation," commented a senior analyst.
Wider Market Repercussions and Ecosystem Risks
Continued optimism about the promise of AI technology has driven a sharp rise in company valuations in recent months, but there has been a increasing chorus of warnings from regulators and business leaders who say stock market valuations could plummet if investors become let down by the progress or commercial uptake of AI technology.
While Oracle has established itself as a key technology provider creating software for major corporations worldwide and has more recently grown rapidly in cloud computing, there are growing questions about how dependent firms are becoming on mutual investment within the artificial intelligence industry.
Oracle reported that its measure of remaining performance obligations rose by 440 percent over the past year. However, market watchers were wary when it was revealed that these commitments were propelled by large deals from other tech giants like Meta and Amazon.
"While these are two solid customers, it will not soothe concerns that big tech's AI investments are interdependent, which leaves it susceptible to a loss of investor confidence," observed a research director.
"In summary, robust backlog increase was not enough to placate fears about AI and the enormous amount of investment spending needed by companies to construct AI capacity."
Broader Sell-Off in Tech Stocks
Other technology stocks also fell in extended trading following the Oracle results. Key movers included:
- Nvidia: Stock dropped by 1.3 percent.
- Alphabet (Google): Stock dropped by 0.3%.
- SoftBank: In Japan, the investment firm's shares tumbled by 7.7% on Thursday.
