• Oracle’s stock fell 32% in three months amid investor concerns over OpenAI exposure.

• Capital expenditures hit a record $12 billion in the latest quarter, far exceeding expectations.

• Remaining performance obligations total $523 billion, nine times annual revenue, largely tied to OpenAI.

Oracle’s dependence on OpenAI strains finances with exploding capex and debt. Discover how this AI partnership impacts the cloud leader’s future stability and growth prospects—read key insights now.

What is Oracle’s dependence on OpenAI causing for the company?

Oracle’s dependence on OpenAI is creating significant financial pressures, including massive capital expenditures and a bloated backlog of obligations that dwarf its annual revenue. This relationship, forged through a $300 billion AI-computing services deal, has tied Oracle’s fate to OpenAI’s success amid intensifying competition from models like Google’s Gemini 3. As a result, Oracle’s stock has plummeted, reflecting investor worries about the imbalance between commitments and cash flow.

How has Oracle’s capital spending been affected by OpenAI obligations?

Oracle’s capital expenditures exploded to $12 billion in the quarter ending November, surpassing analyst forecasts of $8.4 billion and prompting a revised full-year outlook from $35 billion to $50 billion. This spending, equivalent to 75% of projected annual revenue, marks a sharp departure from the prior five-year average of 17%, highlighting the strain from building data centers for OpenAI and other cloud clients. In comparison, Meta anticipates capex at about 36% of its revenue, underscoring Oracle’s outsized investment in AI infrastructure. Expert analysis from Gil Luria of D.A. Davidson emphasizes the risks of borrowing heavily for capacity that may not fully materialize if OpenAI underperforms.

Frequently Asked Questions

What are Oracle’s remaining performance obligations with OpenAI?

Oracle’s remaining performance obligations stand at $523 billion, with the majority linked to OpenAI contracts for future AI-computing services. This backlog is nearly nine times the company’s annual revenue, far exceeding ratios at rivals like Microsoft, which maintains a backlog about 1.4 times its revenue. These commitments hinge on sustained AI demand and OpenAI’s ability to fulfill the $300 billion deal.

Why did Oracle’s stock drop after its latest earnings report?

Oracle’s stock fell 12% in after-hours trading following its fiscal second-quarter report, which revealed unexpectedly high capital expenditures and a raised full-year forecast. Investors reacted to the company’s growing net debt of $88 billion and cash burn of over $13 billion in the past four quarters, contrasting with cash-rich competitors. Moody’s recently noted Oracle’s highest exposure to OpenAI among hyperscalers, with the weakest credit metrics in its investment-grade peer group.

Key Takeaways

• Deep OpenAI Ties: Oracle’s $300 billion commitment exposes it to risks from a single client, unlike its diversified enterprise history.
• Financial Strain: Capex now consumes 75% of revenue, up from 17% historically, fueled by AI infrastructure demands.
• Investor Concerns: Stock declines signal doubts about fulfilling massive obligations amid AI competition from Google and others.

Conclusion

Oracle’s dependence on OpenAI has transformed a once-diversified enterprise software leader into a high-stakes AI infrastructure provider, with capital expenditures soaring and performance obligations ballooning to $523 billion. While revenue grew 14% year-over-year—its strongest in nearly three years—the imbalance between massive investments and OpenAI’s uncertain trajectory raises sustainability questions. As competition intensifies in the AI landscape, Oracle must navigate these obligations carefully to protect its investment-grade rating and reassure investors of long-term growth potential.