Debt Exceeds 100 Billion, Layoffs Continue, Oracle Advances "Three-Step Transformation" Strategy

Oracle Co-Founder and Executive Chairman Larry Ellison. Photo credit: Photographer: Chris Kleponis/CNP/Bloomberg via Getty Images

The enterprise software and cloud infrastructure giant Oracle, with a market value of $400 billion, is facing difficulties. The company’s third-quarter earnings report released on Tuesday showed a decline in profits, and its heavy debt load and negative free cash flow issues have also attracted market attention.

On the surface, analysts expect Oracle’s revenue for the quarter to grow about 20% year-over-year to approximately $17 billion, in line with the company’s previous guidance of 19% to 21% growth. Excluding certain items, earnings per share are expected to increase about 16% to $1.71. However, behind these numbers, the situation is much more complex, and these potential issues have caused the company’s stock to decline about 20% since 2026.

How Oracle’s stock performs after Tuesday’s earnings report will largely depend on which narrative Wall Street focuses on more.

First is the layoffs issue. Last quarter, Oracle disclosed a restructuring plan through 2026, expected to cost up to $1.6 billion, mainly due to “employee severance costs.” Of this amount, Oracle has already confirmed about $826 million in related expenses, meaning the company still needs to pay approximately $788 million. Bloomberg reported last week that Oracle is considering cutting thousands of jobs to realign its workforce and further shift from an enterprise software licensing company to a cloud infrastructure provider, competing with Microsoft and Amazon.

Meanwhile, like other large-scale cloud service providers, Oracle is raising funds by issuing bonds. At the end of the most recent fiscal year, the company’s total outstanding debt was $92.6 billion. In the first six months of this fiscal year, this figure increased to $108.1 billion, partly due to the issuance of bonds worth up to $18 billion in September 2025, with maturities ranging from 2030 to 2065. Additionally, Oracle disclosed that it has $248 billion in data center lease obligations not yet reflected on its balance sheet. The company hopes these investments will eventually translate into customer demand and revenue growth.

In the last quarter, Co-CEO Catz Maguire attempted to reassure investors about the company’s future capital needs. Maguire stated that the company is committed to maintaining its investment-grade debt rating. Moody’s currently assigns Oracle a Baa2 rating, just two levels above “junk” status, and lower than Amazon, Alphabet, Meta, and Microsoft.

Last quarter, when discussing external estimates of Oracle’s capital expenditure plans, Maguire said: “We have read many analyst reports, many of which expect Oracle to need to raise over $100 billion to complete these projects. But based on current conditions, we expect the funding needed for these projects to be less than that amount, and possibly significantly lower.”

Like other large cloud providers such as Alphabet and Meta, Oracle is ramping up the construction of more data centers and infrastructure to support AI development, leading to a surge in capital expenditure. In May last year, Oracle’s operating cash flow was $20.8 billion, but capital expenditures reached $21.2 billion, turning free cash flow negative by $394 million. From fiscal 2024 to 2025, Oracle’s capital spending jumped from $6.9 billion to $21.2 billion. The company also projected that capital expenditure for this fiscal year would reach $50 billion. Meanwhile, its operating cash flow increased from $18.7 billion in 2024 to $20.8 billion in 2025, with analysts expecting it to hit $22.3 billion this year. The company stated that the negative free cash flow trend is expected to continue as it advances its AI strategy.

Oracle founder and Chairman Larry Ellison pointed out that all of this is part of Oracle’s “three-step transformation” strategy. Ellison told investors last quarter that the first step is enabling Oracle databases to run on competitors’ cloud platforms, including Amazon’s AWS, Alphabet’s Google Cloud, and Microsoft’s Azure. The second step is “vectorizing” data so it can be read by AI models. Ellison said this step makes the data stored in Oracle systems more valuable. The third step is building what Ellison calls an “AI Lakehouse,” which involves vectorizing all enterprise data, not just data in Oracle databases or applications.

Ellison said, “Training AI models with public data is the largest and fastest-growing business in history. Making AI models infer based on private data will become a larger, more valuable business. Most of the high-value private data in the world is stored in Oracle databases.” (Fortune Chinese)

Translator: Liu Jinlong

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