Oracle faces pressure from over $100 billion in debt and large-scale layoffs as it advances with Larry Ellison’s three-step transformation

The $400 billion enterprise software and cloud infrastructure behemoth Oracle is facing scrutiny following a fiscal third-quarter earnings decline on Tuesday, as attention turns to its heavy borrowing and negative free cash flow.

To set the context, analysts are forecasting roughly 20% quarterly revenue growth to around $17 billion, aligning with Oracle’s prior-year guidance of 19% to 21% growth. Adjusted earnings per share (excluding certain items) are projected to rise about 16% to $1.71. However, beneath the surface, there are deeper challenges—these issues have contributed to a roughly 20% drop in Oracle’s stock so far in 2026.

How Oracle’s stock performs after its Tuesday earnings release will hinge largely on which narrative Wall Street decides to prioritize.

First among these challenges: job cuts. Last quarter, Oracle unveiled a 2026 restructuring plan expected to cost up to $1.6 billion, primarily for employee severance. Of that total, the company has recorded approximately $826 million in charges related to the plan—meaning around $788 million remains unrecognized. Bloomberg reported last week that Oracle is weighing layoffs in the thousands to adjust its workforce and accelerate its transition from an enterprise software licensing firm to a cloud infrastructure provider competing with Microsoft and Amazon.

Meanwhile, Oracle has turned to bond issuances to raise capital, similar to other hyperscalers. At the end of its most recent full fiscal year, the company had $92.6 billion in outstanding total debt. In the first half of its current fiscal year, that figure climbed to $108.1 billion following a massive $18 billion note issuance in September 2025, with maturities spanning 2030 to 2065. Oracle has also revealed an additional $248 billion in future data center lease commitments not yet reflected on its balance sheet, which it expects to translate into increased customer demand and revenue growth.

Last quarter, co-CEO Clay Magouyrk sought to calm investor concerns about the company’s future capital requirements. Magouyrk stated that Oracle is dedicated to preserving its investment-grade debt rating. Moody’s assigns Oracle a Baa2 rating—two levels above junk status and lower than ratings for Amazon, Alphabet, Meta, and Microsoft.

“We’ve reviewed numerous analyst reports, and many project that Oracle will need upwards of $100 billion to complete these infrastructure buildouts,” said Magouyrk last quarter, referencing external estimates of the company’s planned capital expenditures. “Based on our current assessment, we anticipate requiring less—if not significantly less—capital than that amount to fund this buildout.”

Like other hyperscalers including Alphabet and Meta, Oracle’s capital expenditures are surging as it races to construct additional data centers and AI infrastructure. Last May, Oracle’s free cash flow turned negative by $394 million, as its $21.2 billion in capital expenditures exceeded its $20.8 billion in operating cash flow. From fiscal 2024 to 2025, Oracle’s capex skyrocketed from $6.9 billion to $21.2 billion; last quarter, the company guided that capex would reach $50 billion in the current fiscal year. Meanwhile, its operating cash flow grew from $18.7 billion in fiscal 2024 to $20.8 billion in fiscal 2025, with analysts projecting it will hit $22.3 billion this year. The company has stated it expects the negative free cash flow trend to persist as it advances its AI ambitions.

According to founder and executive chairman Larry Ellison, all these efforts support Oracle’s three-phase transformation. Ellison told investors last quarter that the first phase involved making Oracle databases accessible within competitors’ cloud platforms, including Amazon’s AWS, Alphabet’s Google Cloud, and Microsoft’s Azure. The second phase was “vectorizing” data to make it compatible with AI models—this enhances the value of customer data stored in Oracle’s systems, Ellison explained. Third, Oracle developed what Ellison termed an “AI Lakehouse,” which vectorizes all of a company’s data, not just that held in Oracle databases or applications.

“Training AI models on public data is the largest and fastest-growing business in history,” Ellison said. “AI models that reason on private data will be an even larger and more valuable business. Oracle databases hold most of the world’s high-value private data.”