Oracle Shares Plunge 10.83% on AI Overbuilding, Debt Surge and Missed Revenue Forecasts

Oracle shares plunged 10.83% in pre-market trading on December 12, 2025, as investors reacted to a string of financial and operational red flags. The tech giant reported quarterly revenue of $16.06 billion, undershooting estimates by $150 million, while cutting its third-quarter growth forecast to 16–18% from expectations of nearly 19.4%. The company also revealed a $15 billion increase in capital expenditures for fiscal 2026, citing the need to build AI-ready cloud infrastructure, but warned of prolonged free cash flow negativity of –$13 billion over the past year.

Investors grew wary as Oracle’s aggressive spending collided with rising debt—$127 billion in total, with $25 billion maturing in the next three years. Future cloud contract bookings of $523 billion, though substantial, fell short of $526 billion projections, signaling potential softness in long-term demand. Analysts highlighted risks of overbuilding infrastructure in a market where AI-driven revenue acceleration remains delayed, raising questions about whether Oracle’s strategy prioritizes scale over profitability.

The selloff intensified as the stock’s forward P/E of 29.56—higher than peers like Microsoft and Amazon—faced scrutiny. With cash flow constraints and a debt-laden balance sheet, Oracle’s ability to justify its valuation hinges on proving that its AI investments will translate into durable earnings growth. For now, the market is pricing in uncertainty, reflecting a broader debate over whether the AI boom is fueling sustainable innovation or inflating speculative bubbles.

For investors, the key challenge lies in balancing Oracle’s ambitious AI vision with its financial realities. If the company can demonstrate that its $15 billion in capex is generating returns that exceed current expectations, the forward P/E ratio might be justified. But with free cash flow still negative and debt obligations looming, the path to profitability remains unproven. In the near term, market sentiment will likely remain volatile as the company’s AI investments play out over the next few quarters.

Looking ahead, Oracle must navigate a delicate balance: scaling its AI infrastructure to remain competitive while maintaining a financial structure that supports long-term growth. The company’s success will depend not only on technological innovation but also on its ability to manage debt, improve cash flow, and convince investors that the AI investment will deliver measurable returns. Until that happens, the stock’s performance is likely to remain speculative and subject to market sentiment shifts.