Oracle stock drops 11% as AI capex bill hits $55.7B

Oracle reported negative free cash flow of $23.7 billion for its last fiscal year and told investors to expect a fresh $20 billion capital raise. Investors sold the stock down 11%, leaving it roughly 6% below where it started the year while the Nasdaq is up 11%.

The quarterly results were not bad. Revenue jumped 21% to $19.18 billion, beating analyst estimates. Adjusted earnings per share of $2.03 topped the $1.96 consensus tracked by LSEG. But those beats did not matter. What investors priced was the cash burn.

Capital expenditures jumped 162% year over year to $55.7 billion, almost entirely AI infrastructure: data centers and GPUs powering Oracle Cloud and its commitments to the Stargate project alongside OpenAI. New CFO Hilary Maxson told analysts the net capex outlay for fiscal 2027 will run around $70 billion, excluding $20 billion to $25 billion in customer prepayments. Oracle also plans to raise $40 billion total through debt and equity financing, on top of the $43 billion in debt and $5 billion in equity it raised in fiscal 2026.

The scale of the commitment is visible in the backlog. Oracle’s remaining performance obligation, revenue not yet recognized, hit $638 billion as of May 31, up 363% year over year. Bank of America analysts noted that over 50% of that figure comes from OpenAI alone. Cloud infrastructure revenue itself grew 93% to $5.8 billion. CEO Clay Magouyrk said Oracle aims to bring almost one gigawatt of compute online in the current quarter, roughly equal to everything it added in all of fiscal 2026.

So the revenue signal is real. The problem is sequencing. Oracle is spending $55.7 billion this year to capture $638 billion in backlog that will be recognized over years. The gap between cash out and cash in is what negative free cash flow measures, and at negative $23.7 billion, the gap is large. Piper Sandler analysts called the stock “debated” but maintained a buy, citing AI-driven consumption growth. The market took a different view in real time.

This is the public-company version of a stress test running across all AI infrastructure. Private companies carrying similar capex loads can absorb the burn on narrative; valuations move on investor conviction, not quarterly cash flow statements. Public companies get marked to market every ninety days. Oracle is the first major incumbent to cross into negative free cash flow territory from the AI buildout, and the 11% drop is the market pricing the risk that the spending does not convert to profit on any foreseeable timeline.

The pattern has been building. OpenAI’s 10-gigawatt lease commitment, CoreWeave’s GPU-backed financing, Google’s multi-billion commitments to Anthropic: the AI infrastructure bill across the industry is enormous and the return is unproven at the margin. Oracle is the canary because it is a profitable, decades-old enterprise software company that now reports cash flows indistinguishable from a startup in an expansion phase. The honest read is not that the spending is wrong. The honest read is that the gap between capex and demonstrated return is now wide enough that even a company beating estimates on the top and bottom line gets sold off for closing it slowly.

Any enterprise software company or cloud provider currently modeling AI infrastructure investment against future contract revenue should treat Oracle’s quarterly disclosure as a live stress test of their own assumptions about when the capex converts.

Reported by CNBC (cnbc.com), 2026-06-11.