Oracle slides after OpenAI data center delays push timeline to 2028

Oracle took another hit after word spread that several data centers tied to its massive OpenAI contract will now finish in 2028, not 2027. Reportedly, the change came from labor shortages and limits on key materials, and investors reacted fast. The stock dropped as much as 6.5%, then traded down 5.3% at $188.26 on Friday.

Oracle and OpenAI did not comment on the delay, even though the projects are meant to support one of the biggest AI infrastructure deals in the world.

The contract is worth $300 billion, signed this summer, and it requires Oracle to supply the computing power to train and run OpenAI’s models.

The US sites are still being built on tight timelines, and people familiar with the work say they are set to become some of the largest data centers on the planet.

Clay Magouyrk, one of Oracle’s chief executives, told investors on an earnings call that the first site in Abilene, Texas, remains on schedule and already has more than 96,000 Nvidia chips delivered. He said, “We have ambitious achievable goals for capacity delivery worldwide.”

Oracle faces pressure as delays trigger market reaction

Oracle’s slide came right after its newest earnings report, which reversed the momentum the company enjoyed earlier this year.

Shares had climbed for months as Oracle locked in multibillion-dollar data center deals, including the OpenAI agreement, and that rally briefly pushed Larry Ellison past Elon Musk as the world’s richest person. That streak ended this week when results landed below analyst expectations and the delays raised new questions about Oracle’s AI push.

Oracle’s cloud business still showed big growth. Fiscal second-quarter cloud revenue jumped 34% to $7.98 billion. Its infrastructure business rose 68% to $4.08 billion, but both numbers came in just under forecasts.

Oracle is now spending heavily on data centers to serve OpenAI, TikTok-owner ByteDance, and Meta. The scale of the build-out has pushed Oracle’s credit costs higher.

ICE Data Services said protecting Oracle’s debt for five years rose as much as 0.17 percentage point to 1.41 percentage point, the highest intraday level since April 2009.

Jacob Bourne, an analyst at Emarketer, said, “Oracle faces its own mounting scrutiny over a debt-fueled data center build-out and concentration risk amid questions over the outcome of AI spending uncertainty.

This revenue miss will likely exacerbate concerns among already cautious investors about its OpenAI deal and its aggressive AI spending.”

Oracle absorbs rising costs as investors look for faster payoff

Oracle’s remaining performance obligation reached $523 billion, well above the $519 billion analysts expected. Investors want to see that flow into revenue sooner rather than later. But Oracle’s cash burn increased this quarter, and free cash flow hit negative $10 billion. Bloomberg data shows the company’s total debt at around $106 billion. JP Morgan’s Mark Murphy wrote, “Investors continually seem to expect incremental cap ex to drive incremental revenue faster than the current reality.”

The delays add another layer of concern for markets still trying to price the risks around Oracle’s AI spending. Workers close to the data center projects said shortages of labor and materials forced the timeline change. These projects were originally meant to showcase Oracle’s ability to move fast in the AI race. Now the shift into 2028 adds pressure on both Oracle and OpenAI.

Clay Magouyrk said in a statement, “Oracle is very good at building and running high-performance and cost-efficient cloud data centers. Because our data centers are highly automated, we can build and run more of them.” The message was meant to reassure investors, but the stock kept falling as traders processed the cost load tied to Oracle’s expansion.

Oracle is trying to hold on to momentum in cloud computing while building some of the most expensive AI sites in the market.

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