Oracle stock price plunges over 20%: The dilemma of AI's rapid advancement and cost overruns

In the just-passed Q2 of fiscal year 2026, global tech and database giant Oracle delivered a mixed bag of results that left Wall Street with both hopes and concerns: its cloud infrastructure (OCI) revenue surged 68% year-over-year to $4.1 billion, but at the same time, the company’s stock price plummeted nearly 11% the day after the earnings report was released.

As of January 12, Oracle’s stock closed at $196.30, down a total of 6.15% over the past four weeks, with market anxiety continuing to spread. This is not just a simple earnings fluctuation; it profoundly reveals investors’ worries about the widening gap between technological ambitions and financial realities in the AI arms race.

01 Market Shock Post-Earnings: Expectation Mismatch and Sharp Drop in Stock Price

Oracle’s latest earnings report triggered a fierce market reaction. The company’s second quarter revenue was $16.06 billion, up 14% year-over-year, but fell short of Wall Street’s expectation of $16.19 billion.

The real trigger for market sentiment was the company’s aggressive capital expenditure plans. Oracle raised its capital expenditure forecast for FY2026 from the previous estimate of $35 billion to $50 billion, an increase of $15 billion.

This decision directly caused the stock to drop over 11% in after-hours trading following the earnings release, marking the largest single-day decline since January of this year. The market’s concern is clear and direct: has the cost of chasing the AI dream already far exceeded the tangible returns it can deliver?

02 AI-Driven Growth Miracle: “Reservoir” of Orders and “Bleeding” Cash

Oracle’s story has two starkly different sides.

On one hand, its AI-driven growth prospects are dazzling. The company’s remaining performance obligations (RPO), representing signed but yet-to-be-completed contracts, reached an astonishing $523 billion at the end of the second quarter, soaring nearly 440% compared to the same period last year.

This includes long-term large contracts from tech giants like Meta and Nvidia. The company has even set an ambitious goal for cloud infrastructure (OCI) revenue to reach $166 billion by 2030.

On the other hand, the funding required to support this grand blueprint is depleting the company’s cash flow at an unprecedented rate.

In the just-ended fiscal quarter, despite an operating cash flow of about $2.1 billion, the $12 billion in capital expenditures directly led to approximately $1 billion in free cash outflow. Over the past four quarters, its cumulative free cash flow has reached -$13.2 billion.

03 Investor Pressure and Questions: Dual Risks of Overvaluation and High Leverage

The core source of shareholder pressure stems from profound changes in the financial structure. To meet the surge in capital spending, Oracle’s debt levels have been climbing steadily.

After issuing $18 billion in new bonds in November, its total debt has reached approximately $111 billion, while the company’s cash and equivalents held at the same time are about $20 billion. The high leverage amplifies potential business risks.

High capital expenditure, increased debt interest, and a temporary slowdown in revenue growth have caused the credit default swap (CDS) prices, which measure default risk, to rise to their highest levels since January 2009 following the earnings report.

Although some Wall Street analysts remain optimistic about its long-term benefits from AI platform shifts, the investment logic has shifted into a phase where “seeing is believing.” The market is reassessing whether the company can effectively convert its massive on-paper orders into profitable real revenue in this capital-intensive expansion cycle.

04 Rapid Market Response and Capital Game

The reaction from capital markets has been swift and brutal. Since reaching a historical high of approximately $345.72 in September 2025, Oracle’s stock has fallen about 43% from that peak as of January 12, 2026, representing a significant correction.

This starkly contrasts with the 10% rise of the “Big Seven” tech giants during the same period. This divergence clearly indicates that, amid the AI investment frenzy, the market has begun to rigorously scrutinize the specific paths and financial health of different companies.

05 Resonance in the Crypto Market: When AI Narratives and Volatility Coexist

The turbulence experienced by traditional tech giants in the AI wave resonates subtly with the performance of assets around the “AI + Blockchain” concept in the crypto market. Tokens associated with AI concepts often show high volatility, requiring investors to have tools capable of piercing through the noise to identify true value and potential risks.

As a leading global digital asset platform, Gate is committed to empowering users through technological innovation. Recently, Gate launched the GateAI market analysis tool within its trading app, providing automated market data summaries and insights.

This tool is positioned as decision support rather than an automated trading system, aiming to help users better grasp market trends amid vast amounts of information.

Meanwhile, Gate emphasizes platform security and transparency. According to the latest reserve proof report released on January 6, 2026, the platform’s overall reserve coverage ratio reached 125%, with total reserves valued at $9.478 billion, and all core assets held in excess reserves, ensuring the safety of user assets.

On the path toward global compliance, Gate has also made key progress, obtaining a license from the Dubai Virtual Assets Regulatory Authority (VARA) and officially launching the compliant trading platform Gate Dubai for the region, providing safe and compliant digital asset trading services for local users.

Future Outlook

The continued decline in Oracle’s stock price and the soaring of its credit default swap prices vividly depict Wall Street’s conflicting mindset: on one side, mountains of future order commitments hint at a vast AI-driven future; on the other, the expanding black hole of capital expenditure and mounting debt threaten to swallow current cash flows and test investors’ patience.

In the grand narrative of AI, Oracle’s stock trajectory, like its servers carrying hundreds of billions of dollars in orders, is under unprecedented pressure from reality.