Oracle had a genuinely good quarter by almost every measure. Revenue hit $19.2 billion, up 21% from the same period last year, topping what analysts had expected. Cloud computing revenue nearly doubled. The company raised its earnings forecast for next year above what Wall Street was expecting.
And the stock dropped 11%.
The reason is simple: Oracle is spending money it does not yet have, and the scale of that spending is growing faster than the revenue coming in. Free cash flow, which is the actual cash a company generates after paying for its operations and investments, came in at negative $23.7 billion for the full year. One year earlier, the deficit was $394 million. That is a 60-fold increase in cash burn in a single year.
To plug that gap, Oracle spent $55.7 billion building data centers in fiscal 2026, a 162% increase. It raised $43 billion in new debt and another $5 billion by selling shares. And it is not done: the company says it will spend around $70 billion on data centers in the coming fiscal year and raise another $40 billion to fund it.
All of this ties back to one relationship. Oracle is the main infrastructure builder for Stargate, a joint project with OpenAI to construct AI computing facilities across the United States. The deal is worth over $300 billion between the two companies over five years. Oracle's total order backlog, money customers have contractually committed but not yet paid, reached $638 billion. More than half of that comes from OpenAI alone.
That concentration is what makes investors nervous. OpenAI earns roughly $2 billion per month in revenue but has never turned a profit. If OpenAI slows its spending, delays payments, or runs into financial trouble, a very large portion of Oracle's future revenue projections falls apart. Melius Research analysts noted that Oracle's competitors are unlikely to slow their own spending, meaning Oracle cannot afford to pull back either.
Oracle is also not the obvious leader in the cloud market it is trying to dominate. Amazon and Microsoft each hold far larger shares of the cloud computing market. Newer companies like CoreWeave, which recently signed a $21 billion deal with Meta for AI computing capacity, are growing faster and were built from the ground up specifically for AI workloads.
The saving grace in Oracle's numbers is that customers are prepaying for infrastructure, between $20 billion and $25 billion of the coming year's spending will come directly from customer cash deposits. That reduces how much Oracle actually needs to borrow. And one analyst forecasts that Oracle will return to positive free cash flow by 2029.
For businesses that use Oracle products today, whether for databases, finance software, or HR systems, the immediate practical impact is limited. But Oracle's push into AI infrastructure is clearly where its leadership is focused. That means its traditional enterprise software business, the one that most of its non-tech customers actually interact with, is increasingly the funding source for a very large construction project, not the main event.
The Stargate data centers are real and under construction. The first site in Abilene, Texas is already running. Oracle plans to bring online nearly as much computing capacity in the current quarter as it built in the entire previous year. The physical infrastructure is moving fast. The financial model to pay for it is still being assembled.