Oracle’s $23.7 Billion Cash Drain: How Record Cloud Revenue and 21,000 Job Cuts Tell the Same AI Story

Oracle is facing a brutal market reality: it can post the best quarter in its history, see its cloud backlog balloon to $638 billion, and still watch its stock get sliced in half from its 52-week peak. The company’s shares closed at €134.24, down 16.4% over seven days and off 26% year-on-year. The RSI of 31.1 screams oversold. Yet the pain is more than technical — it reflects a growing fear that the enormous sums poured into AI infrastructure may not produce returns fast enough to satisfy today’s investors.

The market’s anxiety is compounded by a cost-cutting campaign of historic proportions. Oracle eliminated roughly 21,000 positions over the past year, representing 13% of its global workforce. Headcount fell from 162,000 to 141,000 by the end of May, and severance charges ran to $1.8 billion. Another 500 jobs were cut in Romania just today, following 400 there late last year. Management has explicitly tied the reductions to automation and artificial intelligence. The message is clear: Oracle intends to run leaner even as it builds bigger.

The revenue side of the story could hardly be stronger. For the fiscal year ending May 2026, total sales hit $67.4 billion, a 17% jump. Cloud revenue crossed the halfway mark for the first time, reaching $34 billion. Within that, Oracle Cloud Infrastructure surged 77% to $18.1 billion. In the fourth quarter alone, cloud sales climbed 47% to $9.9 billion, with infrastructure accelerating 93%. The company’s remaining performance obligations — contracts signed but not yet recognized — exploded 363% to $638 billion, adding $85 billion in Q4 alone. Bank of America estimates that more than half of that backlog is tied to OpenAI.

Should investors sell immediately? Or is it worth buying Oracle?

But those eye-popling numbers come with an equally staggering bill. Capital expenditures more than doubled to $55.7 billion in fiscal 2026, largely driven by data center construction for clients such as Meta and OpenAI. Free cash flow swung to negative $23.7 billion. For fiscal 2027, Oracle plans to spend roughly $70 billion on capex. To fund the buildout, it intends to raise $40 billion through debt and equity, including a $20 billion share placement already announced. That is on top of the $43 billion in new debt and $5 billion in equity raised in fiscal 2026. Total debt now stands at about $130 billion.

Wall Street analysts, for the most part, remain undeterred. Guggenheim’s John DiFucci calls the selloff unwarranted and advises aggressive buying. Bernstein’s Mark Moerdler lifted his target to $325, while Wolfe Research raised its to $225, pointing to the 93% IaaS growth. The consensus price target sits at €222.52, roughly 66% above the current share price. That gap between analyst optimism and market pessimism highlights a fundamental clash of time horizons.

Management is sticking to its 2027 targets: $90 billion in revenue and adjusted EPS of $8.05. By 2030, Oracle expects to grow sales at a 31% compound annual rate and earnings per share at 28%. CEO Clay Magouyrk has said the company will bring nearly a gigawatt of computing capacity online in the current quarter — roughly as much as it deployed in all of fiscal 2026. The ramp is accelerating even as profitability remains an open question.

The selloff has driven Oracle’s shares more than 22% below their 200-day moving average. That is not a garden-variety correction; it is genuine dread that the billions Oracle is burning may not translate into sustainable cash flow anytime soon. The first real test of that narrative will come with the next quarterly report in the fall, when investors will look for evidence that the monumental infrastructure spend is beginning to generate the kind of returns that can justify the gamble.

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