Oracle’s (ORCL) stock experienced a dramatic roller-coaster ride in 2026. At the beginning of the year, the share price stood at approximately $196, and fueled by positive news on artificial intelligence cloud contracts, it once climbed to a peak of $248. However, over the past several months, the situation has taken a sharp turn, with the company’s stock suffering a severe slump, plunging more than 50% to hit a new 52-week low.
Based on the latest earnings report, Oracle’s underlying business fundamentals continue to show robust expansion. In the fourth quarter of fiscal year 2026, the company’s total revenue reached $19.2 billion, a year-over-year increase of 21%, with cloud infrastructure sales surging 93% to $5.8 billion. For the full fiscal year, total revenue grew 17% to $67.4 billion, while the overall cloud business posted a 39% jump, generating $34 billion in revenue. Particularly noteworthy is the remaining performance obligation, which skyrocketed to $638 billion, a staggering 363% year-over-year increase, largely driven by large-scale long-term training and inference agreements signed with AI developers.
The market’s focus has shifted from backlog of orders to the hefty cost required to deliver those orders—namely, the issue of capital intensity.
Capital expenditure data reveals another side of Oracle’s AI strategy. In fiscal year 2026, the company’s capital expenditures surged to $55.7 billion, more than doubling from $21.2 billion in the previous fiscal year, driven by massive investments in AI data centers and high-performance computing clusters. This scale of spending has directly led to a severe cash flow deficit: although operating cash flow grew 54% to $32 billion, free cash flow turned negative, reaching negative $23.7 billion. To sustain the advancement of infrastructure projects, the company relies heavily on external capital infusions, casting a shadow over its financial soundness.
In principle, Oracle must maintain high-intensity spending to convert its backlog of orders into actual revenue, but the scale and manner of financing are becoming core risks for shareholders. In fiscal year 2026, Oracle issued $43 billion in bonds and plans to raise approximately $40 billion more in fiscal year 2027, including a previously authorized $20 billion at-the-market equity issuance program, which sets the stage for future equity dilution when the stock price recovers.
Notably, the massive capital expenditures in the AI sector have begun to trigger alerts in the broader credit market. Recently, the credit default swap (CDS) prices of several AI companies, including Oracle, have been climbing steadily—a key indicator for measuring corporate default risk. Oracle’s CDS rose to approximately 215 basis points this week, nearing recent highs and significantly above the roughly 145 basis points seen at the end of last year. At the same time, CDS prices for SpaceX (SPCX), CoreWeave (CRWV), as well as tech giants such as Nvidia (NVDA), Meta (META), Amazon (AMZN), and Alphabet (GOOG), have also hit record highs. Rising CDS prices typically signal increasing credit risk, prompting bond investors to demand higher yields, which in turn further elevates corporate financing costs and places more severe funding constraints on the future expansion of the entire AI industry.
