There was a lot to like from Oracle‘s (NYSE: ORCL) latest quarterly results and guidance for the upcoming fiscal year.
Oracle stock jumped in response to the earnings release but remains down 20% year to date at the time of this writing, badly underperforming the tech sector’s 3.3% decline and the S&P 500‘s 2% drop.
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Here’s why Oracle remains in “prove it” mode for investors as it burns cash at a breakneck pace, and some insight into whether the growth stock is worth buying despite its glaring risks.
Oracle stock hit an all-time high last September after announcing a detailed roadmap for exponential artificial intelligence (AI) growth led by Oracle Cloud Infrastructure (OCI). But to pull it off, Oracle has to take on significant debt, because its database and data management software segment doesn’t generate enough cash flow to cover costs.
As investors digested the consequences of this debt, Oracle has undergone a massive sell-off over the last six months. And the cash burn has only gotten worse — with Oracle reporting a staggering $43.8 billion in negative free cash flow (FCF) through the first three quarters of fiscal 2026, compared to $26.2 billion in positive FCF in fiscal 2025.
Clay Magouyrk, Oracle co-CEO and head of OCI, addressed the cash burn on the third-quarter fiscal 2026 earnings call:
The reason we are not even more profitable right now, despite the fact that we are continuing to grow EPS [earnings per share], etc., is because we have so much under construction at one time, and we have some expenses for those things. Now we are really good at that. We are very, very good at minimizing the time under which that construction is happening. We are very, very good at reducing those costs during that time period. But they are not zero. And so as our business is going through this hypergrowth phase, that is the only drag on profitability. But, thankfully, we are very good and getting better at delivering that capacity. That capacity, when we deliver it, is all already contracted for at a very profitable rate. So when you combine those things together, we are extremely confident in both the capacity we delivered and the continuing increase in profitability of our AI business.
Oracle’s overall costs are coming down as it gets better at operating its data centers through lower networking, hardware, and power costs. But its spending remains an issue.