Stock Market Today, June 11: Oracle Falls After AI Spending Guidance Sparks Cash Flow Concerns

Oracle (NYSE:ORCL), an enterprise software and cloud services provider, closed Thursday at $184.10, down 8.53%. The stock dropped after its fiscal Q4 earnings beat was overshadowed by guidance for sharply higher AI-related capital spending and negative free cash flow. Trading volume reached 63.1 million shares, about 128% above its three-month average of 27.6 million shares. Oracle IPO'd in 1986 and has grown 290,861% since going public.

How the markets moved today

The S&P 500 rose 1.73% to finish Thursday at 7,393, while the Nasdaq Composite gained 2.54% to close at 25,810. Within software and infrastructure names, Microsoft closed at $390.34, down 1.77%, and Salesforce finished at $166.49, falling 2.59%, outperforming Oracle’s steeper decline.

What this means for investors

By most measures, Oracle’s Q4 results were excellent:

• sales grew 21%
• adjusted EPS increased 20%
• remaining performance obligations nearly quintupled
• management guided for 34% sales growth in 2027

However, Oracle also announced that it would have to spend heavily on capex to help fund its booming AI business. Management announced it would be spending $70 billion in net cash on capex in 2027 -- compared to the $32 billion it earned in cash from operations this year.

To help fill this funding gap, the company stated it plans to raise $20 billion from debt and $20 billion from at-the-market equity offerings, which could slightly dilute shareholder value, further prompting today’s decline.

While this soaring capex amplifies Oracle’s risk, it’s more or less the cost of doing business in today’s AI-focused world, so investors need to determine if that factor will keep them from investing in a given technology stock or not.

Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Oracle, and Salesforce. The Motley Fool has a disclosure policy.