Oracle’s stock plunged 14% on Thursday after the company posted quarterly revenue that fell slightly short of expectations, renewing concerns about whether its heavy investments in artificial intelligence will generate the returns investors hoped for.
The company reported $16.1 billion in revenue for the three months to November, just under the $16.2 billion analysts projected. Despite the miss, revenue still rose 14% year-on-year, driven by a 68% jump in sales at Oracle Cloud Infrastructure (OCI), which supports many AI developers.
Demand for OCI has surged this year, helping Oracle’s share price reach record highs. But the latest results did little to calm fears that the AI sector may be growing too fast. Oracle’s shares have now fallen 40% since their peak three months ago, though they remain more than one-third higher than at the start of the year.
A major part of Oracle’s momentum came from its September deal with OpenAI, which agreed to purchase $300 billion worth of computing power over five years. The news briefly made chairman and CTO Larry Ellison the world’s richest person. Yet Ellison struck a careful tone in his latest statement, saying the rapid evolution of AI means the company must stay “agile” in its strategy.
Ellison also promoted what he called “chip neutrality,” stressing that while Oracle will continue buying Nvidia GPUs, it will source chips from any provider to meet customer demand. His comments were viewed by some as a subtle distancing from Nvidia.
The market reaction rippled across the tech sector. Nvidia’s shares fell more than 3.5%, while AMD dropped nearly 4%. Analysts say Oracle’s large AI contracts have raised questions about “circular financing,” where companies fund purchases of their own products through complex arrangements.
Jacob Bourne from Emarketer said investors are questioning whether Oracle may be overexposed to OpenAI, which is under scrutiny over profitability. He also noted concerns about the rising debt Oracle has taken on to build new data centers.
Colleen McHugh of Wealthify said the reaction reflects a broader worry about overvalued tech stocks. “Many of these stocks are priced for absolute perfection,” she said, adding that even a small revenue miss can trigger a sharp sell-off.
Others argued the market overreacted. Cory Johnson of Epistrophy Capital Research said Oracle delivered a strong quarter, with accelerating revenue growth and $385 billion in contracts signed over six months, including deals with Meta and Nvidia. “But AI sentiment is so bad right now, that’s seen as a negative,” he said.
Oracle also raised a record $18 billion in a bond sale in September, one of the biggest debt issuances in tech history. Analysts say that while the company’s recent surge has kept shares elevated, the latest revenue miss could amplify investor doubts about its aggressive AI strategy.
The Ellison family’s recent acquisition of Paramount and their bid for Warner Bros. Discovery also remain in focus as the billionaire deepens his influence in both tech and entertainment.
