The stated reason, as has become somewhat customary in Silicon Valley at this point, was artificial intelligence.
“AI models have become so efficient at generating computer code that we are reorganizing our product development teams into smaller, more agile and productive groups,” the company shared in a press release. “This new AI code generation technology is enabling us to create more software in less time with fewer people.”
Oracle’s stock has suffered recently, falling more than 50% since its September peak after it announced more data center plans with OpenAI under Stargate. Although Oracle’s shares once soared so high at the peak of the AI business that it briefly turned its chairman Larry Ellison into the richest man on Earth, the decline is also due to artificial intelligence. Wall Street fears AI will impact Oracle no matter which way demand for the technology increases.
One aspect of this is that Oracle is investing billions of dollars to build a major data center. This fiscal year, the company plans to spend $50 billion, almost double what it spent a year ago.
But with delays to some of these data center projects and the company’s growing reliance on debt markets, experts became uneasy about Oracle’s ability to meet huge commitments.
Meanwhile, financial commitments have turned the company’s free cash flow negative. Last quarter, free cash flow fell to negative $24,736. Experts predict that it will remain negative by 2030.
Due to the cash crunch, company executives began planning to cut thousands of jobs across the company earlier this month, according to Bloomberg. report Since last week, that has effectively included a work stoppage in its cloud division.
Oracle is a pioneer for market confidence in AI, and the question of free cash flow has increasingly affected other major players in the industry. AI hyperscalers Amazon, Alphabet, Meta and Microsoft all presented shocking capital spending figures in earnings reports last month, stoking fears that spending is growing too fast while AI adoption is failing to deliver real returns. Those fears added to the growing AI bubble discussion, even prompting Nvidia CEO Jensen Huang to spend a good portion of his company’s earnings assuring investors that hyperscalers (who coincidentally are also Nvidia’s top customers) will see increased cash flow as more spending translates into revenue.
Oracle’s earnings boost, along with improved sales guidance for 2027, is key to convincing investors that demand for AI will continue to exceed supply. This, along with assurances that AI is increasing productivity at the company, may help Oracle allay some fears about the future of both the company and the AI business.
The other side of the AI impact coin is that if AI becomes too powerful and makes software companies obsolete, in a feared “apocalypse”. Last month, following Anthropic’s cloud cowork release and a Substack scenario outlining this possibility, investors began selling software provider shares in a frenzy. Oracle was among the software stocks affected, but executives took to an earnings call Tuesday to convince investors that their company was an exception.
Co-CEO Mike Sicilia told investors, “The use of AI-coding tools inside Oracle is enabling smaller engineering teams to provide more complete solutions to our customers. We are building brand new SaaS products using AI and also embedding AI agents into our existing applications and suites.” “Yes, some small or single-focus SaaS players may be disrupted, but Oracle will not be among them.”
Regardless of any story, investors may have been quite satisfied with Oracle’s response on Tuesday, as the stock rose more than 8% following the release.
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