Oracle (ORCL) shares dropped as much as 3.8% in premarket trading Thursday, falling to $180.40 from Wednesday's close of $187.50. The decline came even as the company expanded its Google Cloud AI database product lineup, caught in a broader selloff of software stocks.
Analyst Concerns Over Spending and Margins
Morgan Stanley lowered its price target on Oracle to $207 from $213, maintaining an Equal Weight rating. Analyst Keith Weiss cited lingering questions around GPU-as-a-service, financing, and the margins tied to that fast-growing segment. The move reflects Wall Street's growing unease about the costs of scaling AI infrastructure.
Cloud Expansion and AI Integration
On Wednesday, Oracle announced several updates to its Oracle AI Database@Google Cloud, including a new AI agent built for Gemini Enterprise, expanded regional access, and enhanced integration with Google's data tools. The service is now available in 15 regions. The AI agent allows customers to query Oracle data using plain English, eliminating the need for SQL. Nathan Thomas, senior vice president at Oracle Cloud Infrastructure, emphasized that data controls remain at the database layer.
At Google's Cloud Next conference in Las Vegas, Satish Thomas, Google Cloud's vice president for applied AI and platform ecosystem, said customers need a simple, trusted way to work with business data through intelligent agents. Google aims to build a software moat around Gemini Enterprise to capture more corporate AI budgets, competing with Microsoft and Amazon.
Multicloud Strategy and Infrastructure Investments
Oracle is deepening its multicloud push. Last week, it announced plans to boost private, high-speed connections between Oracle Cloud Infrastructure and AWS, building on existing links to AWS, Google Cloud, and Microsoft Azure. This gives customers more flexibility to run workloads across multiple providers.
The scale of AI infrastructure investment continues to widen. Earlier this month, Related Digital was reportedly closing in on $16 billion in financing for an Oracle-run data center in Michigan, part of the Stargate AI buildout with OpenAI. Last week, Bloom Energy announced it will deliver up to 2.8 gigawatts of fuel-cell capacity to Oracle to meet surging AI power demand.
Financial Performance and Risks
Oracle continues to post strong results. Cloud revenue rose 44% to $8.9 billion in the March quarter, with cloud infrastructure soaring 84% to $4.9 billion. The company projects total cloud revenue growth of 46% to 50% for the current quarter and maintains its $50 billion capital expenditure forecast for fiscal 2026.
However, investor caution persists. After Oracle's March-quarter results, Hargreaves Lansdown's Matt Britzman flagged the financing debate as ongoing, noting that customer prepayments and bring-your-own-hardware deals could boost future revenue commitments without full cost burden. Remaining performance obligations surged 325% to $553 billion.
The broader software selloff Thursday was sparked by IBM's sluggish software numbers and ServiceNow's deal delays in the Middle East, reminding investors that AI bets must deliver earnings. UBS strategists argue the hurdle is showing AI actually improves products, workflows, and returns.
Oracle finds itself in a tight spot: expanding partnerships with Google Cloud and AWS, yet its shares move on questions about whether AI demand can keep pace with soaring costs. Investors lately have preferred chip stocks over software.
