Oracle CEO Clay Magouyrk speaks during a Q&A session after a tour of the OpenAI data center in Abilene, Texas, on September 23, 2025.
Shelby Tauber | Pool | Reuters
3 months ago oracle Clay Magwirk and Mike Sicilia have been named new CEOs. They are off to a tough start.
Oracle stock has plunged 30% so far this quarter. With four business days left in the period, stocks are on pace for their biggest decline since 2001 and the dot-com bust.
Investors are growing skeptical about whether the database software vendor will be able to open more server farms for ChatGPT operator OpenAI, which agreed with Oracle in September to spend more than $300 billion.
Earlier this month, Oracle reported lower-than-expected quarterly revenue and free cash flow. In an earnings call, newly appointed finance chief Doug Koehling called for $50 billion in capital spending for fiscal 2026, a 43% increase from the company’s September plan and double the total from the same period last year. Additionally, in addition to building data centers, Oracle plans to sign $248 billion in lease deals to increase its cloud capacity.
Such growth requires large amounts of debt. In September, Oracle raised $18 billion in a jumbo bond sale, one of the largest debt issuances in history in the tech industry. On the earnings call, Koehring pledged to maintain Oracle’s investment-grade debt rating. But some skeptical investors are betting otherwise, pushing up the price of Oracle’s credit default swaps.
“Given that Oracle already barely maintains an investment-grade rating, we would be concerned about Oracle’s ability to meet these obligations without restructuring its OpenAI contract,” DA Davidson analysts wrote in a Dec. 12 note to clients. The company’s rating is equivalent to a hold rating on the stock.
Oracle declined to comment.
Mr. Magwirke and Mr. Sicilia’s tenure began at a time of historical optimism.
About two weeks before taking over from Safra Catz, Oracle reported 359% in accrued revenue that was largely tied to the OpenAI commitment. The deal represented a major endorsement for Oracle, which was removed from Gartner’s list of top five cloud infrastructure providers by revenue in 2024.
Following news of the OpenAI agreement on September 10, Oracle’s stock price rose about 36%, the third-strongest rally since the company’s IPO in 1986. The stock hit an intraday high of $345.72.
“I think $340 was a scary amount,” Zachary Lountzis, vice president of Lountzis Asset Management, said in an interview. Mr. Lountzis owned $25 million in Oracle stock as of Sept. 30, according to filings.
The stock has since fallen 43%, closing at $197.49 on Wednesday, but it soared last Friday when TikTok announced it had agreed to sell part of its U.S. operations to Oracle and other investors. Oracle has been providing cloud services to TikTok for years.
“I’m not betting on the rally.”
Lountzis said his team first bought Oracle stock in 2020, when the stock was below $60. The company has held its stock through recent highs and lows, acquiring about 30,000 additional shares in the first quarter of this year.
“Our philosophy is that we can live with overvaluation in the short term if the economics of the business have not changed, and that was the case with Oracle,” Lountzis said. “Despite the mostly positive news coming out, we didn’t feel that the economics of the business had changed. And I think the decline from $340 to $180 was actually a very healthy correction.”
For Lountzis, much of his trust in the company comes from Larry Ellison, who founded Oracle in 1977 and is now the world’s second-richest person, according to Bloomberg.
“If you had bet on the rally over the last 50 years, you would have gone bankrupt 40 times,” Lountzis said. “He sees a future.”
In October, Sicilia, Magouik and Kering laid out a vision for a faster-growing Oracle, with sales expected to rise from $57 billion in fiscal year 2025 to $225 billion in fiscal year 2030. Most of that growth is due to AI infrastructure, Nvidia’s At its core is a graphics processing unit.
But while Magourik had told analysts to prepare for “hypergrowth,” such expansion would come at the cost of profitability, as Oracle’s core software business has much higher margins.
Oracle’s gross margin for fiscal 2021 was 77%. Analysts surveyed by FactSet expect that ratio to drop to about 49% by 2030, resulting in a total negative free cash flow of about $34 billion over the next five years before turning positive in 2029.
Eric Lynch, managing director at Suncoast Equity Management in Florida, said as an investor it’s hard to buy into Oracle’s plan.
“Four or five years is a long time,” Lynch said. “That’s not within our investment discipline.”
Lynch also said he was concerned about such a heavy reliance on OpenAI. OpenAI is rapidly burning through cash, pledging to build and invest more than $1.4 trillion in AI.
“Is there a demand from OpenAI?” Lynch said.
Wells Fargo analyst Michael Tulin initiated coverage on Oracle earlier this month with a buy rating and a $280 price target. He said industry perception is likely to improve as Oracle moves forward with OpenAI adoption, and Turrin estimates that OpenAI could account for more than a third of the company’s revenue by 2029.
“They are shifting from a value-oriented business to a more growth-oriented business,” Tulin said.
A big challenge for Oracle is continuing to gain market share in cloud infrastructure, where the company lags far behind. Amazon, microsoft So does Google, even though its customer roster includes names like: Meta, Uber And Elon Musk’s xAI.
Databricks, which was just valued at $134 billion in a funding round, doesn’t make its popular data processing software available on Oracle’s cloud.
Databricks CEO Ali Ghodsi said in an interview that it happens when “customers start knocking on my door saying, ‘We need to run on Oracle.'” “Maybe we’re getting there, we just aren’t hearing it.”
data brick rival snowflake I haven’t brought the service to Oracle either.
Turin said Oracle’s credibility in the market depends on its success in building AI.
“Customers look at this and start saying, wow, this company has been trusted to build one of the largest training clusters in the world, and we’re doing it,” Tulin said. “We need to look at it and understand what’s going on here.”
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