Oracle is holding firm on its aggressive spending plans for data centers. The company reported $28.5 billion in first-quarter capital expenditures on Thursday, a significant jump from $8.5 billion a year earlier. Despite this surge, Oracle kept its fiscal 2027 capital expenditure forecast at $90 billion to $95 billion. That figure includes data center spending and remains unchanged from the guidance first issued in June.
Financing the AI Buildout
Many major cloud companies have raised their AI spending forecasts recently. They are racing to build more data centers and expand capacity. Microsoft is a notable exception. It kept its capex forecast unchanged in July, and its stock soared after reporting earnings. Oracle’s approach differs slightly in execution, if not in scale.
During the earnings call, co-CEO Clay Magouyrk addressed how long the firm will continue this heavy AI infrastructure spending. He shifted the focus to financing methods rather than timelines. “We have to separate out in our minds what Oracle spends as capex directly, uncouple that directly from how we think about how the business can grow,” he said. The comment suggests a strategic pivot toward managing the balance sheet.
Oracle has borrowed tens of billions of dollars to build data centers and buy chips. The organization faces pressure to balance that spending with Wall Street’s profitability expectations. It reported $55.7 billion in capex, including new facilities, in its 2026 fiscal year. To manage this debt load, the vendor has developed several financing models. These include supplier financing arrangements, customer prepayments, and “bring your own hardware” deals. In the latter, customers purchase hardware while Oracle provides the cloud infrastructure and operations.
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The market reaction was immediate and positive. Oracle shares were up 7% after the company reported 121% growth in cloud infrastructure revenue. This growth appears to have eased Wall Street fears about whether data center spending would translate to sales. The stock movement stands in contrast to other tech giants. Alphabet and Tesla recently increased their capex projections, sending their stocks tumbling in July. Meta narrowed its own capex forecast range during the same period.
One might compare Oracle’s strategy to the broader trend of tech firms leveraging debt for infrastructure. While the industry generally relies on cash flow, Oracle’s heavy use of external financing is a distinct tactic. This approach allows for rapid expansion but introduces leverage risks. The key question remains whether revenue growth can outpace the cost of capital. For now, the revenue jump suggests the strategy is working, at least in the short term.
Workforce and Debt Pressures
Business Insider reported last month that Oracle had drawn up plans for a new round of job cuts. The goal was to reduce payroll as the company racks up billions in debt to fund AI infrastructure. This move highlights the internal tension between aggressive growth and cost management. The company is trying to maintain high profitability metrics while funding a massive capex cycle.
The fiscal 2027 forecast represents a substantial commitment. It reflects Oracle’s confidence in the long-term demand for AI infrastructure. The company’s ability to execute this plan without further financial strain will be watched closely by investors. The 7% stock gain indicates that analysts are currently buying into that confidence. Oracle is currently reducing headcount to offset the rising debt costs associated with its AI infrastructure buildout.
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