Oracle stock traded lower in New York after the company pitched a $260 billion artificial intelligence leasing plan. Shares slid as investors reacted to the large commitment.
Oracle Corporation NYSE:ORCL lost 2.9% to $136.52 in early trading Monday in New York, bringing its valuation down to roughly $397.5 billion. Some investors are weighing the company’s outstanding AI orders against a big number from the credit market: $260 billion in future data-center lease payments. Last week, S&P Global Ratings downgraded Oracle to BBB-, its lowest investment-grade rating, saying those obligations count toward adjusted debt.
Timing matters here. Oracle projects just 12% of its $638 billion in remaining performance obligations—contracted revenue it hasn’t booked yet—to turn into revenue in the 12 months from June 1. That’s $76.6 billion, coming in just $6.6 billion over its expected $70 billion in capital expenditures, or capex, for fiscal 2027. Gross capex, which is money spent on big assets like data centers, could reach $95 billion, counting $20-$25 billion it thinks customers will pay back. This is not a cash-flow call, but it does underline how much Oracle is spending. “The funding question is getting harder, not easier,” eMarketer analyst Jacob Bourne said. Reuters
Weekend notes showed the divide. Yahoo Finance flagged Jim Cramer’s concerns on Oracle’s balance sheet, while a Seeking Alpha writer kept a sell and pointed to $55.7 billion in fiscal-2026 capex and negative $23.7 billion free cash flow—cash left after capital spending. Zacks saw it differently, telling holders to stay because Oracle Cloud Infrastructure is growing fast and the backlog is still sizable. The disconnect is timing: contracts roll in over years, but funding and leases hit sooner.
| Oracle measure | Amount | Relative to RPO due within 12 months |
|---|---|---|
| RPO due within 12 months | $76.6 billion | 100% |
| Oracle-funded fiscal-2027 capex | $70.0 billion | 91% |
| Gross fiscal-2027 capex | up to $95.0 billion | up to 124% |
| Unstarted data-center leases | $260.0 billion | 340% |
The lease ratio shows a company’s size, not what it owes right now. Payments run over several years.
Oracle’s latest annual report lays it out. The company reports $260 billion in additional leases—almost all tied to data centers—set to begin between the first quarter of fiscal 2027 and fiscal 2029, with most running 15 to 19 years. These aren’t due in a lump sum soon. Oracle also made $19 billion in cloud infrastructure purchase agreements after May 31, payable over five years. All in, that’s $279 billion in disclosed obligations, about 70% of Monday’s equity value. The company says these should not be seen the same as bond debt.
Oracle’s spend isn’t as big as some peers in dollar terms, but it looks huge compared with its equity. Amazon.com NASDAQ:AMZN is aiming for $200 billion in capex for 2026, and Alphabet NASDAQ:GOOGL is looking for $175 billion to $185 billion. Both Amazon and Alphabet have much bigger market caps.
| Company | Disclosed capex plan | Market value at 10:10 EDT | Capex as a share of market value |
|---|---|---|---|
| Oracle | $70 billion, self-funded, could total $95 billion by FY2027 | $397.5 billion | 17.6%, could reach 23.9% |
| Amazon | $200 billion by end of calendar 2026 | $2.68 trillion | 7.5% |
| Alphabet | $175 billion to $185 billion for calendar 2026 | $4.32 trillion | 4.1% to 4.3% |
Fiscal periods and definitions of capex vary. This ratio only gives a ballpark sense of funding intensity, not a valuation.
Oracle’s bull case is not weak. Fourth-quarter OCI revenue climbed 93% to $5.8 billion, and total cloud revenue was up 47% at $9.9 billion. The company said around $75 billion in its largest AI contracts is either prepaid or uses customer-supplied hardware, which eases Oracle’s need for upfront funding. Oracle is aiming for $90 billion in fiscal-2027 revenue and plans no new debt in calendar 2026. “Our pace of delivery continues to accelerate,” CEO Clay Magouyrk said. CFO Hilary Maxson said gross margins would “step down” as project activity ramps up. Oracle Investor Relations
Bond buyers are demanding a premium for tech risk. Long-term AI-related tech bonds are offering yields about 60 basis points higher than non-tech bonds with the same credit grade — a basis point is one-hundredth of a percent. AI-linked bond sales have hit $270 billion so far this year, the Financial Times said. Following S&P’s downgrade, Oracle’s 5.7% 2036 bond spread was at 184 basis points, per the Wall Street Journal.
But there’s a flip side to the bear case. That $260 billion in leases is spread out over 15 to 19 years, and some of the upfront cash and hardware from customers lowers the outlay. If OCI keeps growing around its recent rate, it could use capacity faster than credit investors think. The risks are a lag on revenue booking, slower payback from customers or a drop-off in data-center use. Oracle would still have to cover those leases even as margins get squeezed, maybe leading to more stock offerings or extra debt after 2026.
So investors are looking at a tighter gauge than Oracle’s $638 billion backlog number. The company needs to prove it can turn those contracts into cash fast enough to cover a fiscal year where planned capex is close to the revenue it already expects from contracts. Right now, what matters for the stock is how quickly cash comes in, not the total backlog.
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