The tech firm's lackluster latest earnings have erased in excess of $70 billion from the worth of the software and data company co-founded by billionaire Larry Ellison, intensifying escalating concerns of a speculative bubble in AI-related stocks.
Stock in the firm tumbled by over 11 percent overnight after it posted a disappointing 14% rise in revenues to $16bn in the most recent quarter, while simultaneously announced plans to boost its artificial intelligence investment by approximately $15bn.
The enterprise reported disappointing three-month sales for the period ending in November, with sales at its key cloud services business expanding at a slower pace than anticipated, at thirty-four percent.
Shareholders were further let down by a more moderate sixty-eight percent growth in income from its cloud infrastructure unit.
At the same time, investors were unnerved by the company's increased projections for spending on artificial intelligence. It now projects capex to surge by 40% to $fifty billion dollars, with the lion's share of the additional spending directed toward expanding cloud infrastructure.
This aggressive spending plan is set against a growing debt pile, with Oracle's corporate debt having jumped by 25% over the past year to reach $nearly one hundred billion dollars.
"Honestly, the earnings release was not dramatically bad, but it came to confirm fears around substantial AI spending, financed by debt, with an unclear timeframe for profitability," said a market analyst.
Sustained exuberance about the potential of AI tech has led to a surge in market capitalizations in the past year, but there has been a growing spate of warnings from policymakers and business leaders who warn stock market valuations could correct sharply if investors become let down by the progress or adoption of AI solutions.
While Oracle has established itself as a key tech player developing software for major corporations worldwide and has more recently grown rapidly in cloud computing, there are increasing concerns about how dependent companies are becoming on each other’s financing within the artificial intelligence industry.
Oracle said that its measure of revenue from customer contracts jumped by 440 percent over the past year. However, analysts were wary when it emerged that these contracts were propelled by large deals from major customers like Meta and Amazon.
"While these are high-quality customers, it will not soothe concerns that big tech's AI investments are becoming circular, which leaves it susceptible to a erosion of market faith," observed a research director.
"In summary, robust backlog increase was not enough to alleviate anxiety about AI and the enormous amount of capital expenditure needed by companies to build AI capacity."
Additional technology stocks also declined in after-hours trading following the Oracle announcement. Key performers included:
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