Oracle Faces Legal Challenge Amid Aggressive AI Spending

A new class action lawsuit has cast a shadow over Oracle Corporation, adding pressure to the software giant's ambitious growth strategy. The legal action, filed on Friday by a group of bondholders, alleges the company misled investors during an $18 billion debt issuance. The plaintiffs contend that Oracle may not have required such substantial borrowing to fund its artificial intelligence expansion, as claimed.

This legal development arrives at a critical juncture for Oracle. The company has significantly ramped up capital expenditures to build out AI infrastructure, projecting spending of approximately $50 billion for fiscal year 2026. This aggressive investment has already impacted its cash position: the second quarter of the current fiscal year saw Oracle report a negative free cash flow exceeding $10 billion.

Adding to the scrutiny, a recent SEC filing dated January 16 revealed that Douglas Kehring, Oracle’s Executive Vice President and Chief Financial Officer, sold 35,000 shares on January 15. This transaction was executed under a pre-arranged Rule 10b5-1 trading plan established back in October 2025.

Contrasting Metrics: Record Backlog vs. Debt Concerns

Despite these headwinds, Oracle’s future revenue pipeline appears robust. The company’s Remaining Performance Obligations (RPO), a key metric representing contracted future revenue, have surged to around $523 billion. This figure marks a more than fourfold increase year-over-year, bolstered by major cloud and AI agreements with industry leaders such as Meta and NVIDIA.

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

These contracts underscore Oracle’s strategic pivot from a traditional software provider to a significant infrastructure contender in the AI sector. However, market sentiment suggests investors are currently weighing the risks associated with the company’s debt-heavy strategy more heavily than its long-term growth potential.

Market Reactions and Upcoming Dividend

The unfolding legal situation introduces uncertainty as Oracle approaches its next dividend payment, scheduled for January 23. Analyst perspectives are mixed. Following a recent stock price decline, some market observers view the equity as undervalued. Analysts at KeyBanc highlighted the substantial RPO as a solid foundation for future growth in a note published Friday.

The near-term direction for Oracle’s share price will likely hinge on whether market participants assign greater importance to the emerging legal risks or to the value embedded in its long-term contractual commitments. Several law firms have already announced investigations into the bond issuance, indicating the matter could develop into a significant legal challenge.