Oracle’s (NSDQ:ORCL) Growth Engine Is Running, But on Borrowed Fuel

Investors Hit Ctrl+Alt+Sell as Oracle’s Leverage Rises

Oracle (NSDQ:ORCL) has just experienced one of its toughest sessions since January, falling as much as 15% before a small bounce. The market’s reaction reflects a growing concern that the company is leaning too heavily on debt to sustain its spending cycle at a time when chip demand is still finding its footing.

When we look at Oracle’s free cash flow trend, the decline is hard to ignore. Management is allocating aggressively to capex in pursuit of growth, yet the return on that spending is not materialising fast enough to justify the current pace. That is where the risk begins to build. Oracle is now turning to debt markets to keep its investment program moving, and to us this starts to look less like organic expansion and more like a strategy that relies on external funding to maintain momentum, even with headline deals tied to the major US tech players.

For long term investors, this creates a tension. On one hand, Oracle is positioning itself for the next wave of cloud and AI infrastructure demand. On the other, the financial strain is becoming more visible. The company must prove that the next few quarters can convert this heavy capex into meaningful revenue growth. If they can demonstrate this, today’s sell off may eventually look like an overreaction. If not, the concerns around leverage and weakening free cash flow will remain front of mind.

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Building the Cloud on Borrowed Billions

Oracle has ramped up its spending on data centres, with fiscal 2026 first half capex already reaching US$20.5B compared with US$6.3B last year. The company now forecasts full year capex of US$50B, up from US$35B, which highlights just how aggressive Oracle’s operating model has become. Investors should recognise that this is not a small jump. It is a very large expansion.

When we look at how the company intends to finance this build out, it appears Oracle is relying more heavily on debt. Total debt stands at US$108B with US$8.1B due within twelve months. Key recent issuances include US$18B in senior notes, one of the largest tech bond deals this year, and management has plans for another US$38B in November. When companies use debt at this scale, it increases business risk, and this is what the market is currently acknowledging and pricing in.

The company is still seeing top line growth, with cloud revenue improving more than 30%, but the question we need to ask is whether 30% growth is enough to justify this level of spending and leverage. That tension is at the heart of the current debate around Oracle.

Oracle’s Spending Spree

Oracle’s CapEx has historically been modest and focused on maintaining software infrastructure, but the rapid shift toward cloud computing and AI has driven a sharp escalation. From fiscal years 2021 to 2025, average annual CapEx sat around US$8.7B, with a median of US$6.9B, reflecting investments in cloud regions and hardware. This represents almost a three fold increase, and what we can take away here is that Oracle is going all in on AI while costs are rising quickly. It may still be several years before we see this level of spending fully materialise in earnings.

The Investors Takeaway for ORCL

Analyst sentiment paints a mixed picture. Twelve analysts currently rate the stock a hold, while the thirty three analysts with buy ratings carry an average price target of US$335 per share. This is a tougher call because it is hard to see a clear pathway to profitability while spending is accelerating and the debt mix continues to increase. Growth investors need to ask themselves whether the current share price offers enough potential upside to justify these risks. In my view, around US$198 is a reasonable point to begin deeper research and start forming a view on Oracle.