Oracle Corp. shares dropped significantly after increased spending on AI data centers did not immediately translate into cloud revenue, disappointing investors. Capital expenditures rose to $12 billion in the quarter, exceeding analyst expectations. The company now expects to spend about $50 billion on capital expenditures by May 2026. Oracle’s stock fell 11% to $198.85.

Despite a successful quarter in cloud sales, Oracle’s stock has been under pressure due to concerns about the costs and time required for AI infrastructure development. The company’s debt has increased significantly, leading to a rise in credit risk. Wall Street remains cautious about Oracle’s aggressive AI spending and the outcomes of its OpenAI deal.

Investors are eager to see Oracle turn its infrastructure spending into revenue quickly. The company’s free cash flow turned negative at $10 billion, with total debt reaching around $106 billion. Oracle’s management is committed to maintaining an investment-grade debt rating while continuing to invest in revenue-generating equipment for its data centers.

Oracle reported a 14% increase in total revenue to $16.1 billion, with cloud software application business rising 11% to $3.9 billion. Cloud infrastructure unit generated more sales than the applications business for the first time. Earnings per share, excluding some items, were $2.26, boosted by the sale of Oracle’s holdings in chipmaker Ampere Computing.

In the next period, Oracle forecasts a 19%-22% increase in total revenue and a 40%-44% increase in cloud sales. Annual revenue is expected to reach $67 billion, in line with the company’s previous outlook. The company’s new CEOs are working to address investor concerns and adjust spending plans based on demand changes.

Read more at Yahoo Finance: Oracle Slides by Most Since January on Mounting AI Spending