Shares of SAP (NYSE:SAP) (ETR:SAPG) tumbled more than 4% after rival Oracle (NYSE:ORCL) laid out capital spending intentions for fiscal 2027 that came in well above consensus forecasts. The announcement prompted a sharp market reaction to the scale and financing the company expects to undertake.
Oracle said it expects capital expenditures of up to $95 billion in fiscal 2027, while indicating it anticipates recovering up to $25 billion of that amount via customer repayments. Analysts polled by LSEG had been modeling capital spending near $67.7 billion, making the disclosed plan substantially larger than street expectations.
In addition to the capex figure, Oracle disclosed plans to raise nearly $40 billion through a combination of debt and equity in 2027. That package includes a previously announced $20 billion at-the-market equity issuance as part of the financing mix.
The numbers underline the size of the investment required to compete in AI infrastructure. Oracle has won sizable data center contracts with large clients including Meta Platforms and OpenAI as it attempts to close the gap with cloud leaders such as Amazon and Microsoft. The company is increasing capital intensity to support that push and is spending at a scale that market participants have found notable.
CFO Hilary Maxson told analysts that roughly $70 billion of the projected 2027 outlay represents Oracle's own capital spending, with the balance expected to be repaid by customers. She did not provide a timeline for the customer repayments. Maxson also warned that gross margins would "step down" in the current fiscal year as Oracle accelerates its data center buildout.
Oracle's capex trajectory is already sizable. The firm spent about $55.7 billion in fiscal 2026, exceeding its prior $50 billion target, and earlier in the year had flagged plans to raise up to $50 billion through debt and equity sales. The latest disclosures expand both the spending and the planned financing footprint.
Market reactions were pronounced. Oracle shares fell more than 10% in premarket trading following the disclosure. SAP shares declined more than 4% as investors weighed competitive dynamics and the prospect of accelerated infrastructure investment by a major rival.
On the operational front, Oracle reported fourth-quarter revenue of $19.18 billion, slightly above the $19.10 billion analysts had forecast. Adjusted earnings were $2.03 per share, topping the $1.96 consensus. Cloud services revenue reached $9.9 billion for the quarter, up 46% year-on-year in constant currency, while Oracle Cloud Infrastructure revenue rose 92% to $5.8 billion. Total software revenue declined 2% in constant currency to $6.8 billion.
Key takeaways
- Oracle expects up to $95 billion in capital expenditures for fiscal 2027, with up to $25 billion anticipated to be repaid by customers.
- Oracle plans to raise nearly $40 billion in 2027 through debt and equity, including a $20 billion at-the-market issuance previously announced.
- Large data center contracts and rapid OCI growth illustrate the scale of investment required to compete in AI infrastructure; market reaction hit both Oracle and SAP shares.
Risks and uncertainties
- Timing for customer repayments is unspecified - this creates uncertainty around net cash outflow and financing needs for Oracle, affecting capital markets and cloud infrastructure providers.
- CFO comments that gross margins will "step down" signal margin pressure as spending accelerates, posing risks to profitability in the current fiscal year for Oracle and potentially influencing competitor pricing/positioning in cloud services.
- Large financing plans - including nearly $40 billion of planned borrowing and equity issuance - introduce execution and market reception risk for Oracle, which could affect investor sentiment across enterprise software and cloud sectors.