Oracle‘s ORCL aggressive AI infrastructure build-out is once again testing investor patience, even as the underlying cloud business keeps printing record numbers. The tension came into sharp focus following the company’s fiscal fourth-quarter and full-year 2026 results, released on June 10, which showed capital expenditures climbing 162% year over year to $55.7 billion for the fiscal year, far outpacing the growth in cloud revenues meant to justify that spending.
The scale of the buildout is straining Oracle’s balance sheet. Free cash flow for fiscal 2026 came in at negative $23.7 billion, even as operating cash flow hit a record $32 billion, reflecting how much of the company’s cash generation is being plowed straight back into datacenter capacity. Oracle has already raised $43 billion in debt and $5 billion in equity during fiscal 2026, and management has signaled plans to raise roughly $40 billion more in fiscal 2027, including a previously announced $20 billion at-the-market equity issuance.
Set against this spending is a cloud business that is genuinely accelerating. Total cloud revenues rose 47% in the fourth quarter to $9.9 billion, with Cloud Infrastructure (IaaS) revenues nearly doubling, up 93%. Remaining Performance Obligations, Oracle’s forward bookings metric, surged 363% year over year to $638 billion, partly cushioned by $75 billion in prepaid or customer-supplied AI hardware that reduces Oracle’s own funding burden.
Oracle has also used recent weeks to point to where the infrastructure spend is showing up in product terms. Earlier this month, Oracle disclosed that its Multicloud AI Database grew 404% in the fiscal fourth quarter, calling it the company’s fastest-growing business ever. Oracle recently introduced the OPERA Cloud Assistant, embedding AI-driven automation into hotel operations workflows, part of a broader push to fold AI capabilities directly into existing application suites.
Looking ahead, Oracle guided fiscal 2027 total revenues to $90 billion and non-GAAP EPS growth of 18%, with first-quarter cloud revenue growth projected between 58% and 64%. The company also said it does not expect to issue additional debt in 2026. Whether bookings convert into cash flow fast enough to offset the financing load will likely remain the central question shaping sentiment around the stock in the quarters ahead.
How Microsoft and Google Compare on AI Spending
Oracle is not alone in facing scrutiny over AI-related capital intensity. Microsoft MSFT has guided capital expenditures toward roughly $190 billion for 2026, even as Azure growth runs near 40%, prompting investors to question the pace of Microsoft’s spending relative to cloud conversion. Google parent Alphabet GOOGL raised its own 2026 capital expenditure outlook to $180-$190 billion, though Google Cloud revenues grew 63% in its most recent quarter, among the fastest rates across major cloud providers. Both Microsoft and Google, like Oracle, continue defending heavy AI infrastructure outlays as necessary to meet demand that currently exceeds available capacity.
Looking ahead, Oracle guided fiscal 2027 total revenues to $90 billion and non-GAAP EPS growth of 18%, with first-quarter cloud revenue growth projected between 58% and 64%. The company also said it does not expect to issue additional debt in calendar 2026. Whether bookings convert into cash flow fast enough to offset the financing load will likely remain the central question shaping sentiment around the stock in the quarters ahead.
ORCL’s Price Performance, Valuation & Estimates
Shares of Oracle have lost 21.9% in the past six-month period, underperforming the Zacks Computer and Technology sector’s appreciation of 12.9%.
ORCL’s 6-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ORCL stock is currently trading at a premium with a trailing 12-month Price/Earnings ratio of 23.93x, which is higher than the Zacks Computer – Software industry average of 21.89x. Oracle carries a Value Score of C.
ORCL’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ORCL’s fiscal 2027 earnings is pegged at $8.03, which suggests 5.24% growth over the figure reported in fiscal 2026.
Oracle Corporation Price and Consensus
Oracle Corporation price-consensus-chart | Oracle Corporation Quote
ORCL stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Beyond Nvidia: AI’s Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren’t likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
Oracle Corporation (ORCL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
5 Stocks Our Experts Predict Could Double In the Next Year
By submitting your email, you'll also get a free pivot & flow membership. A free daily market overview. You can unsubscribe at any time.