Oracle’s Debt-Fueled AI Ambitions Face Investor Scrutiny

Mounting concerns over Oracle's financial strategy are weighing on investor sentiment. The technology giant finds itself balancing aggressive growth in artificial intelligence against a rapidly expanding debt load, with a recent bondholder lawsuit bringing these tensions into sharp focus.

A proposed class action filed in a New York court is a key driver behind the recent stock pressure. Led by the Ohio Carpenters' Pension Plan, bondholders allege Oracle failed to adequately inform investors about the financing needs for its massive AI infrastructure expansion.

The complaint centers on an $18 billion bond issuance dated September 25, 2025. This occurred just two weeks after Oracle announced a landmark five-year deal to provide $300 billion in computing capacity to OpenAI. Plaintiffs contend the company did not clearly disclose the extent of additional debt required to fulfill this agreement, citing:

• Insufficient transparency regarding future AI infrastructure funding requirements.
• The risk of higher financing costs during a period of sustained capital need.
• The strain on the balance sheet from debt approaching $100 billion.

Debt Burden Becomes Central Concern

The legal action has intensified scrutiny of Oracle's financial position. Analysts at BNP Paribas estimate an additional $25 to $30 billion may be necessary to fund its AI plans. Previously, Morgan Stanley warned that incremental debt could accumulate to as much as $70 billion by 2026, depending on the speed of expansion.

As of November 30, 2025, notes payable and other liabilities stood at $108.1 billion, up from $92.6 billion just six months earlier. In a high-interest-rate environment, the resulting interest expense is becoming a primary focus for investors.

Strong Growth Masks Cash Flow Strain

Oracle's financial results for the second quarter of fiscal year 2026, released in December 2025, revealed robust top-line growth but significant cash flow challenges:

• Total Revenue: Increased 14% to $16.1 billion.
• Cloud Revenue: Jumped 34% to $8.0 billion.
• Cloud Infrastructure Revenue: Surged 68% to $4.1 billion.
• Non-GAAP EPS: Rose 54% to $2.26.
• Remaining Performance Obligations (RPO): Reached $523 billion, up 438%.

Conversely, cash flow metrics turned sharply negative. Trailing twelve-month free cash flow fell to negative $13 billion, driven by heavy capital expenditures which totaled approximately $8.1 billion for the quarter. The company raised its capital expenditure forecast for fiscal 2026 to about $50 billion—roughly $15 billion more than its September estimate—highlighting the substantial balance sheet demands of its AI infrastructure business.

Mixed Analyst Sentiment and Notable Skepticism

Wall Street opinions remain divided. As of mid-January 2026, over 70% of analysts maintain positive ratings, with an average price target of $291.34.

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

Goldman Sachs initiated coverage on January 12, 2026, with a "Buy" rating and a $240 price target, citing tailwinds from AI adoption and Oracle's positioning in the Infrastructure-as-a-Service segment.

In contrast, UBS reduced its price target from $325 to $280, while keeping a "Buy" rating. This adjustment reflects, in part, the stock's 41% decline from its mid-September highs and uncertainties surrounding the outlook and competition from OpenAI-affiliated stocks.

Adding to the cautious tone, Michael Burry's Scion Asset Management disclosed put options on Oracle in early January, focusing specifically on the company's sharply rising debt.

Technical Picture Shows Continued Weakness

From a chart perspective, the stock has struggled to find stable footing. A brief rebound at the 200-day moving average was rejected at the 50-day line, which now acts as resistance. The pattern of lower highs remains intact.

A sustained break below the current support zone could open a path toward the $150 level. Should selling pressure intensify, the April 2025 lows near $118 become a potential target area.

Dividend Provides Limited Comfort

The quarterly dividend of $0.50 per share, payable on January 23, 2026, offers only modest support. The forward payout ratio is 18.72%, with a yield of 1.05%—below the sector average of 1.37%. While the dividend appears solidly financed, it does little to alleviate broader concerns about valuation and balance sheet risk.

Market sentiment has swiftly shifted from AI euphoria to a more critical assessment. The crucial question for the coming months is whether Oracle can translate its massive investment spending into visible, sustainably cash-generative returns while keeping its debt burden under control.