Oracle plans about $70 billion in net capex for AI infrastructure in fiscal 2027, funded by roughly $40 billion in debt and equity, while its remaining performance obligations have swelled to $638 billion. Management expects FY2027 gross margins to step down as high-margin software shifts to capital-intensive data centers, raising balance sheet and execution risks.
Oracle is shifting from its traditional high-margin software business to become a large-scale AI infrastructure provider. This transformation requires building new data centers and developing AI services, marking a departure from its legacy model and reshaping its long-term revenue mix.
To deliver on AI demand, Oracle expects a net cash outlay of around $70 billion in fiscal 2027, funded by approximately $40 billion in new debt and equity. This capital raise will increase leverage and could dilute existing shareholders if equity issuance is substantial.
Management has warned that the fiscal 2027 gross margin will step down as the business mix shifts toward capital-intensive operations. Sustained margin pressure could force the market to revalue Oracle’s multiple if new data centers take longer to fill or deliver lower returns.
Oracle’s remaining performance obligations stand at $638 billion, reflecting future sales promises rather than immediate cash. The company faces the challenge of converting this backlog into actual revenue on schedule, with any data-center delays risking idle assets and missed growth targets.
