Shares of Oracle Corporation (ORCL) plunged to $119.89 on Thursday, their lowest level in more than twelve months and a decline exceeding 50% from the 52-week peak of $345.72. The stock settled near $120.24 after a 4.35% decline on the session, with current trading levels last seen in April 2025.

The steep pullback has erased approximately $213 billion from the net worth of co-founder Larry Ellison over the past ten months.

Capital Spending Surge at the Center of the Selloff

The selloff is driven by concerns over Oracle's aggressive capital deployment toward AI-focused data center infrastructure. Market participants are questioning whether returns will materialize quickly enough to justify the outlays. Oracle is not alone in ramping AI infrastructure investment — Microsoft, Alphabet, Amazon, and Meta have all sharply increased capital spending over the past two years — but Oracle's proportional increase from a lower base has drawn particular scrutiny given its smaller balance sheet relative to those megacap peers.

Capital expenditures soared to $21 billion during fiscal 2026, a sharp increase from approximately $7 billion in the prior fiscal year. Company leadership has projected that capital spending will exceed $25 billion throughout fiscal 2027.

S&P Downgrade Adds to Pressure

S&P Global Ratings lowered Oracle's credit rating to BBB-, placing the company just one notch above speculative-grade, or junk bond, status. The BBB- threshold is significant: any further downgrade would push Oracle's debt below investment grade, potentially restricting access to institutional bond funds and raising borrowing costs across the capital structure. The downgrade compounds financing pressures on top of an already capital-intensive expansion strategy.

Research firm CLSA initiated coverage with a neutral Hold rating and a $145 price objective, citing reservations about Oracle's debt-financed push into AI cloud services. CLSA analysts project that Oracle could require as much as $500 billion in cumulative capital to achieve its 2030 objectives.

Oracle also potentially faces a requirement to supply over $7 billion in collateral for a Wisconsin data center initiative. The state's utility commission has maintained stringent credit standards intended to shield consumers from rising power costs.

Contract Backlog at Record High

Despite the mounting headwinds, Oracle's underlying business metrics remain strong. The company's remaining performance obligations — effectively its contracted revenue pipeline — reached an all-time high of $638 billion as of May 31, 2026, the close of fiscal 2026. That figure represents committed but not yet recognized revenue, giving investors multi-year visibility into top-line growth if Oracle can execute on its infrastructure buildout.

Customer demand for Oracle Cloud Infrastructure continues to be robust, with the enterprise securing substantial agreements and expanding its infrastructure footprint.

Oracle has pursued collaborative partnerships rather than direct competition with AWS, Azure, and Google Cloud. This strategy widens its total addressable market while avoiding aggressive head-to-head rivalry with the dominant hyperscalers.

Analyst Sentiment Divided

Guggenheim reaffirmed its Buy recommendation and $400 price objective following discussions with Oracle management about AI infrastructure deployment timelines and data center rollout schedules.

According to InvestingPro analysis, the stock trades at a P/E multiple of 21.18 with a PEG ratio of 0.62. The RSI metric additionally signals oversold conditions.

A total of twenty Wall Street analysts have raised their earnings projections for the upcoming reporting period. The divergence between bearish concerns over leverage and bullish conviction in the contracted revenue pipeline underscores the central question facing investors: whether Oracle can convert its record backlog into recognized revenue fast enough to service the debt incurred to build it.

Source: Blockonomi