Oracle's stock fell sharply despite reporting quarterly earnings and revenue that exceeded Wall Street expectations. The tech giant revealed plans to raise an additional $40 billion in debt and equity to finance its aggressive expansion into artificial intelligence data centers, fueling investor worries about the scale of its borrowing.

The company posted adjusted earnings per share of $2.03 for the quarter, surpassing estimates of $1.96, while revenue rose 21% to $19.18 billion, slightly above analysts’ forecasts. Net income climbed to $4.22 billion compared to $3.43 billion a year earlier, highlighting continued profitability even as Oracle ramps up spending on AI infrastructure.

Oracle’s capital expenditures skyrocketed by 162% from the previous year, reaching $55.66 billion, emphasizing the firm's commitment to building an AI-driven cloud ecosystem. Depreciation nearly doubled to $7.62 billion, reflecting the heavy investment in tangible assets for this buildout. Meanwhile, free cash flow remained negative at $23.7 billion for the full fiscal year, underscoring the financial strain of Oracle’s strategy.

Despite the outlay, Oracle kept its full-year revenue target steady at $90 billion but raised its adjusted earnings forecast slightly above Wall Street’s consensus to $8.05 per share for fiscal 2027. These numbers indicate confidence in the company’s ability to generate returns amid its AI push.

So far this year, Oracle has secured $43 billion in debt and $5 billion from equity sales and is now planning a new round of financing that includes a recent $20 billion share sale. Investors questioned whether the revenue expected from AI developments will be sufficient to service this growing debt load, driving share price volatility.

Looking ahead, Oracle projects next-quarter earnings between $1.72 and $1.76 per share with revenue growth of 27% to 29%, aligning closely with Wall Street expectations. Cloud revenue for the most recent quarter rose 47% to $9.91 billion, just shy of the $9.97 billion forecast. Software sales declined slightly but surpassed estimates, and cloud infrastructure sales almost doubled, hitting $5.8 billion.

Oracle also reported a significant surge in remaining performance obligations—contracts signed but with revenue not yet recognized—to $638 billion, more than triple last year’s figure and well above analyst projections. This backlog reflects strong demand for Oracle’s cloud and AI services as it rapidly expands its capacity and offerings.