Oracle shares tumble as gloomy forecasts, higher capex reignite AI bubble concerns. This comes as the tech giant’s shares slumped nearly 11 per cent in premarket trading on Thursday, following downbeat forecasts and heightened capital expenditure concerns. Investors are worried that the company’s vast AI investments are taking longer than anticipated to generate returns. Oracle’s capital expenditures for fiscal 2026 are now projected to be US$15-billion higher than the US$35-billion estimated in September during its first-quarter earnings call.

Oracle’s Ambitious AI Investments

Despite the recent slump, Oracle’s shares have enjoyed a substantial rise this year, climbing nearly 34 per cent. This was largely driven by mega cloud-computing deals with OpenAI and others, along with Oracle’s plans to construct large-scale AI cloud data centers. However, investors are becoming increasingly cautious, scrutinizing the earnings reports of major cloud companies for signs of an inflated AI market. Factors contributing to these concerns include heavy spending, high valuations, limited real-world productivity gains, and complex circular investments.

Investor Concerns over Oracle’s Data Center Investments

Analysts at Morningstar expressed mixed feelings about Oracle’s planned data center investments over the coming years. They warned that if long-term enthusiasm for AI wanes and key customers like OpenAI reduce their computing demand, Oracle could struggle to attract workloads that can substitute for AI model training and inference. Furthermore, Oracle’s closely monitored metric for future cloud contracts also fell short of Wall Street’s expectations. The company reported US$523-billion in future contracts, falling below analysts’ estimates of US$526-billion, according to Visible Alpha data.

Oracle’s Funding Strategy for Data Center Construction

During a conference call, Oracle’s CEO Clay Magouyrk responded to questions about how the company would finance the construction of the data centers. He suggested that customers could bring their own chips, thereby reducing Oracle’s upfront capital expenditures. However, this strategy has yet to be proven effective.

Oracle’s Revenue Growth Forecast Falls Short

Oracle also projected a third-quarter revenue growth of between 16 per cent and 18 per cent, which falls short of the 19.4-per-cent estimate of US$16.87-billion, according to LSEG data. Market analyst at eToro, Farhan Badami, commented on this, saying, “This will be a question of patience for investors. This AI boom won’t be an overnight success, and spending in the short term is a necessity, but it will pressure margins.”

Oracle’s Valuation in Comparison to Rivals

Oracle trades at a forward price-to-earnings ratio of 29.56, compared to rivals Microsoft at 27.24 and Amazon at 29.06, according to data compiled by LSEG. This valuation, coupled with the concerns over Oracle’s AI investments and revenue projections, has led to the recent tumble in the company’s shares.

Ethan Radcliffe

Ethan Radcliffe is a senior reporter and digital editor at The Toronto Insider, specializing in Canadian federal policy, GTA urban development, and national economic trends. With over a decade of experience in North American journalism, Ethan focuses on translating complex legislative and economic developments into clear, accessible reporting for Canadian readers. Ethan’s work emphasizes policy analysis, government accountability, and data-driven reporting, with a strong focus on how federal and provincial decisions impact communities across the Greater Toronto Area and beyond. He has covered infrastructure planning, housing policy, fiscal strategy, and regulatory changes affecting Canadian households and businesses. A graduate of Toronto Metropolitan University’s School of Journalism, Ethan brings expertise in investigative reporting, long-form analysis, editorial standards, and digital publishing best practices. His reporting is guided by verifiable sources, public records, and transparent sourcing. In addition to reporting, Ethan has experience in newsroom editing, fact-checking workflows, SEO-informed journalism, and audience analytics, ensuring stories meet both editorial integrity standards and modern digital discoverability requirements. Ethan is committed to objective, fact-driven journalism and adheres to established ethical guidelines, prioritizing accuracy, clarity, and public trust in all reporting.

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