Will Oracle's $35B CapEx Plan Ensure Future Growth or Prove Risky?

Oracle ORCL is making one of its boldest strategic moves yet, forecasting $35 billion in capital expenditures (CapEx) for fiscal 2026, up from more than $21 billion in fiscal 2025. This aggressive investment underscores the company’s determination to expand its cloud infrastructure footprint and strengthen its position as a global cloud powerhouse. The bulk of the spending is directed toward revenue-generating equipment in new data centers, supporting Oracle’s surging Remaining Performance Obligations, which are expected to exceed $500 billion soon.

The plan includes building 37 new multi-cloud data centers, bringing Oracle’s total to 71 worldwide, with new sites under development in Texas and New Mexico. This expansion aims to meet rising demand from enterprise clients and hyperscaler partners, including OpenAI, NVIDIA, AMD and Meta, all of which rely heavily on Oracle Cloud Infrastructure (OCI) for AI workloads. OCI revenues grew 55% year over year in the first quarter of fiscal 2026, and management expects it to rise 77% this year to $18 billion, with long-term projections targeting $144 billion by 2030.

However, this massive capital spending is putting pressure on free cash flow and margins, with a negative $362 million in the first quarter of fiscal 2026, and Oracle has taken on additional debt to finance expansion. The Zacks model forecasts free cash flow to be negative $380.7 million throughout fiscal 2026, which would create liquidity concerns if growth slows.

Still, Oracle’s CapEx supports its expanding AI and multi-cloud ecosystem, powering products like Fusion and NetSuite with embedded AI capabilities. With the Zacks model predicting 16.5% revenue growth in fiscal 2026, the company's strategic bet looks set to pay off.

Oracle Faces Fierce Rivals in AI CapEx Race

Microsoft MSFT is accelerating its AI-driven cloud expansion with record CapEx. In fourth-quarter fiscal 2025, Microsoft spent over $24 billion, and it plans another $30 billion for first-quarter fiscal 2026 alone. Microsoft’s massive investments in data centers, AI chips and cloud infrastructure strengthen its leadership in Azure and enterprise software while positioning Microsoft at the forefront of global AI growth.

Amazon AMZN via AWS is intensifying its AI and cloud dominance with massive CapEx investments. In the second quarter of 2025, Amazon’s spending hit $31.4 billion, with annual investments projected to exceed $118 billion. Amazon’s unmatched scale, in-house AI chip innovation and vast data center network give it a powerful edge over Oracle. With AWS’ global reach and pricing strength, Amazon continues to reinforce its leadership in cloud and AI infrastructure.

ORCL’s Price Performance, Valuation & Estimates

Shares of Oracle have surged 78% year to date, outperforming both the Zacks Computer and Technology sector’s return of 24.4% and the Zacks Computer - Software industry’s rise of 21.5%.

ORCL’s YTD Price Performance

From a valuation standpoint, ORCL appears overvalued, trading at a forward 12-month Price/Earnings ratio of 39.66x, which is higher than the industry average of 33.53x. Oracle carries a Value Score of F.

ORCL’s Valuation

The Zacks Consensus Estimate for ORCL’s fiscal 2026 earnings is pegged at $6.76 per share, an increase of 0.7% over the past 30-day period. The earnings figure suggests 12.11% growth over the figure reported in fiscal 2025.

ORCL stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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