Oracle Faces Financial Strains Amid AI Expansion Efforts
Oracle Corporation ($ORCL) is navigating a challenging financial landscape as it ramps up efforts to expand its AI capabilities. On February 2, 2026, Oracle announced plans to raise between $45 billion to $50 billion through a combination of debt and equity. This aggressive capital raising is intended to bolster the Oracle Cloud Infrastructure (OCI) to serve major clients such as AMD, Meta, Nvidia, OpenAI, TikTok, and xAI. The strategic focus on AI infrastructure has, however, raised concerns about Oracle’s financial health.
Layoff Speculations and Financial Obligations
Recent reports suggest that Oracle may lay off between 20,000 to 30,000 employees as part of its strategy to redirect funds towards its AI data-center investments. This would be one of the largest workforce reductions in Oracle’s history, reflecting the scale of its commitment to transforming its cloud capabilities. The potential layoffs come as Oracle faces substantial financial obligations. As of November 30, 2025, Oracle’s cash reserves were between $19.2 billion and $19.8 billion, while its total debt surpassed $108 billion, resulting in a net debt of approximately $88 billion. The cash-to-debt ratio stands at a precarious 0.18, indicating a leveraged position.
Surge in Capital Expenditures
Oracle’s capital expenditures have surged dramatically, with year-to-date CapEx for fiscal 2026 reaching $20.5 billion, a 227% increase from the previous year. This aggressive spending has led to a negative free cash flow, with a trailing 12-month figure of –$13.18 billion. The company has committed to long-term cloud infrastructure obligations totaling $248 billion, with lease commitments spanning 15 to 19 years. Analysts have raised concerns that such extensive spending could elevate Oracle’s leverage beyond 4× debt-to-EBITDA by 2027–2028, potentially leading to credit rating downgrades.
Market Reactions and Analyst Perspectives
Despite the financial strains, some analysts remain optimistic about Oracle’s growth potential. They project OCI revenue to reach $18 billion in FY2026, representing a 77% year-over-year growth. Long-term forecasts anticipate OCI revenue between $144 billion and $166 billion by 2030. However, market sentiment remains cautious. Oracle’s shares have experienced a decline of approximately 14% following its Q2 FY2026 report, which highlighted a $10 billion negative free cash flow in the first six months and increased CapEx guidance by $15 billion to $50 billion.
Nvidia’s Inventory Concerns Unfounded
In contrast to Oracle’s clear financial challenges, Nvidia ($NVDA) does not currently face similar inventory concerns. The tweet suggesting $6.8 billion of ‘unpaid finished inventory’ for Nvidia appears to be speculative. The most recent related disclosure was in April 2025, involving a $5.5 billion charge for unsold H20 accelerator inventory due to regulatory export restrictions to China. As of February 2, 2026, there have been no verified updates regarding Nvidia’s inventory situation.
Conclusion
Oracle is at a critical juncture as it seeks to balance its ambitious AI expansion with financial sustainability. While the company’s aggressive strategy has the potential for significant revenue growth, it also poses risks related to high leverage and cash flow deficits. Meanwhile, Nvidia’s alleged inventory issues remain unverified, underscoring the importance of distinguishing between speculation and substantiated facts in financial reporting.
Comments are closed.