Oracle Corporation is one of the world’s largest technology companies that specializes in software and cloud infrastructure. The company is now at a critical juncture as it is about to announce its earnings for the third quarter of its financial year.
The company has a market capitalization of $400 billion. The company is under pressure from investors as it has a rising debt level, has undertaken a series of job cuts, and has a negative free cash flow.
Wall Street is expecting robust revenue growth from Oracle. The company is expected to post a revenue of $17 billion for the quarter.
This represents a 20% increase from the same quarter last year. The revenue is within the range that Oracle has guided investors to expect. The company is expected to post earnings per share of $1.71, excluding some items. The earnings are 16% higher than those reported a year ago.
Despite posting robust top-line growth, investors are concerned about the company’s financial health. The company’s stock has fallen by 20% so far this year.
The market’s response to Oracle’s earnings announcement on Tuesday may depend less on its revenue growth than investors’ perceptions of its spending and debt.
The Cloud Pivot of Oracle, Debt, Data Centers, and a $1.6 Billion Restructuring
One thing that is currently being highlighted is the company’s restructuring plan. The company announced its 2026 restructuring plan during its last quarter earnings announcement.
The plan is expected to cost up to $1.6 billion. The major cause for this is the cost associated with severing ties with its employees who were laid off. Oracle has already incurred around $826 million due to this program. This means that there are still around $788 million to be incurred.
The reports are suggesting that the company has laid off thousands of its workers. This is because Oracle is shifting its focus from its enterprise software licensing business to providing cloud infrastructure services. In this field, Oracle is competing with other major technology companies such as Microsoft and Amazon.
However, to finance its expansion drive, Oracle has incurred a lot of debt. The company had around $92.6 billion in total debt during its last financial year. By the first half of its current financial year, Oracle had already increased its total debt to $108.1 billion.
Much of the increase came from a large bond sale in September 2025. Oracle issued $18 billion in notes with maturities ranging from 2030 to 2065. The company has also disclosed $248 billion in future data center lease obligations that do not yet appear on its balance sheet. These leases support planned infrastructure expansion and assume strong future demand from customers.
Balancing Massive Infrastructure Spend Against Credit Stability
Oracle executives argue that the spending is necessary to compete in the fast-growing market for artificial intelligence infrastructure. Co-CEO Clay Magouyrk told investors the company remains committed to maintaining its investment-grade credit rating. Credit agency Moody’s currently rates Oracle Baa2, which sits two levels above junk status.
Magouyrk also pushed back on outside estimates that Oracle might need to raise more than $100 billion to complete its data center build-out. According to him, the company expects to raise less than that amount, possibly much less, to fund its infrastructure plans.
Still, the scale of Oracle’s spending is clear. Capital expenditures have surged as the company builds more data centers for AI workloads. In fiscal 2024 Oracle spent $6.9 billion on capital expenditures. That number jumped to $21.2 billion in fiscal 2025. For the current fiscal year, the company has guided for capex of around $50 billion.
These investments have already pushed free cash flow into negative territory. Last May Oracle reported negative free cash flow of $394 million. Its operating cash flow reached $20.8 billion, but capital spending slightly exceeded that amount.
Operating cash flow continues to grow, though not at the same pace as spending. It increased from $18.7 billion in fiscal 2024 to $20.8 billion in fiscal 2025. Analysts expect it to reach about $22.3 billion this year. Oracle has warned investors that free cash flow may remain negative while the company expands its AI infrastructure.
From Database Giant to AI Powerhouse
According to co-founder and executive chairman Larry Ellison, these investments support a long-term strategy to transform the company. The first step involved making Oracle’s database available inside rival cloud platforms, including Amazon Web Services, Google Cloud, and Microsoft Azure.
The second step focuses on “vectorizing” data so that artificial intelligence models can read and analyze it. This process makes the data stored in Oracle systems more valuable for companies using AI.
The final step is what Ellison calls an “AI Lakehouse.” This system allows businesses to organize and analyze all their data, not just information stored in Oracle databases.
Ellison believes this shift will unlock a much larger opportunity. Training AI models on public data already drives rapid growth across the tech industry. But the next stage, he argues, will involve AI systems reasoning over private corporate data.
Oracle believes it sits at the center of that opportunity because its databases hold some of the world’s most valuable enterprise information. The company’s challenge now is convincing investors that the heavy spending required to reach that future will pay off.
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