On the evening of Wednesday, June 10, Oracle (NYSE: ORCL) stock fell victim to an increasingly common phenomenon among big tech firms as it plunged more than 10% after reporting its latest quarterly earnings.
Specifically, after adding to its overall 11.62% weekly drop with a 2.18% fall during the session to $201.26 at the closing bell, ORCL shares plunged another 10.12% to $180.89.
As was the case for other major technology stocks – Nvidia (NASDAQ: NVDA) perhaps being the most pointed example – the price collapse came after the firm reported a double earnings beat.
Indeed, Oracle’s revenue came in at $19.18 billion – above the anticipated $19.10 billion – and earnings per share (EPS) amounted to $2.03 when $1.96 was expected.
The company also raised its 2027 fiscal year (FY) guidance to $8.05 per share and $90 billion in sales – for reference, analysts were forecasting $8.01 and $88.9 billion, respectively.
Oracle’s soaring AI CapEx could have sent ORCL shares crashing
Still, figures relating to the expenditures linked to the artificial intelligence (AI) buildout provided sufficient reason for concern to drive ORCL equity lower.
Oracle not only unveiled a negative free cash flow of $23.7 billion, but also revealed its depreciation effectively doubled to $7.62 billion and capital expenditure (CapEx) rocketed 162% to $55.7 billion.
These figures were further exacerbated by the revelation that the firm intends to raise another $40 billion through debt and equity financing, with as much as $20 billion coming from a stock sale that was announced earlier in the year.
Lastly, Oracle stock’s latest performance was likely made worse by the company’s exposure to OpenAI’s performance – it agreed to undertake a substantial data center construction effort for Sam Altman’s firm, with the profitability of the endeavor being entirely linked to future growth of the AI giant.
OpenAI’s most recent threats to initiate a pricing war against Anthropic at the time when the debate over the costs and benefits of the technology intensified sharply could have provided an external downward catalyst for ORCL shares.
U.S. stocks experience rising June headwinds across the board
Elsewhere, it is notable that Oracle stock is not unique in its June downward move. The benchmark S&P 500 stock market index has retraced 4.38% since the start of the month amid multiple headwind-generating headlines.
Alphabet’s (NASDAQ: GOOGL) own $80 billion equity fund raise triggered some anxiety over the availability of debt amidst the record-breaking AI-related CapEx upsurge.
Simultaneously, institutional and retail investors have been dumping their holdings to raise cash for the imminent – scheduled for June 12 – SpaceX initial public offering (IPO), just as analysts like Jim Cramer started raising concerns about the availability of capital through the remainder of the year.
Finally, the rising intensity in the clashes between Iran, Israel, and the U.S. that culminated in a nigh-long air campaign against the Islamic Republic and the subsequent total closure of the Strait of Hormuz brought the dwindling oil stockpiles and the impact of the shortages on the global economy back into focus.
Featured image via Shutterstock
