Business

Oracle suffers its roughest session in months ahead of earnings

By Peace Longe TheStreet

Updated June 8, 2026 3:14 PM

Oracle (ORCL) stock just had the kind of day that spooks shareholders.

Shares of the database and cloud giant tumbled about 9.6% on Friday, June 5, closing at $213.68 after opening near $229.

That marked Oracle's steepest single-day drop in months and one of the worst showings among large-cap software stocks.

The selling did not start with Oracle, though.

It started two days earlier with the chip designer, Broadcom, picking up speed on a strong jobs report, and then rolled downhill into every company tied closely to the artificial intelligence buildout.

Oracle sits right in the path of that downhill roll.

Why Oracle stock dropped nearly 9% in Friday's chip selloff

The trigger was Broadcom (AVG0).

The major AI chipmaker reported earnings on Wednesday, June 3, and beat on both sales and profit.

However, its forecast told investors that AI chip sales would only triple in the current quarter, which was not up to what many on Wall Street had hoped, The Motley Fool reported.

As if that was not enough, Broadcom's guidance for the period landed at about $16 billion, short of the roughly $17.2 billion analysts expected. And the fear spread fast.

More Software Stocks:

By Friday, the Nasdaq had sunk 4.18%, its worst session since April 2025, while the S&P 500 fell 2.64%, CNN Business reported.

Oracle fell harder than the broad market because investors view Oracle as a risky bet on artificial intelligence (AI) technology rather than a safe, predictable software company.

For this reason, when the AI market gets shaky, Oracle's stock price drops much faster and further than regular stocks.

Oracle shares fell about 9.6% on June 5 as an AI-driven chip selloff swept the market.

Bloomberg / Getty Images

Oracle's $124 billion debt load and AI cash burn, explained

Here is the backstory that turned a sector scare into a near-double-digit drop for Oracle.

Oracle's future is strongly tied to renting out data center capacity to AI firms, with OpenAI expected to drive a large share of future revenue, and that bet is expensive.

The company carries about $124.7 billion in long-term debt and posted negative free cash flow of roughly $24.7 billion over the trailing 12 months, according to 24/7 Wall St.

Free cash flow is the cash left after a company pays its bills and capital costs, and Oracle's is deeply in the red.

The reason for this is capital spending.

Oracle is pouring money into servers and data centers faster than that capacity is generating cash, a strain that earlier prompted Morgan Stanley to revisit its Oracle target after the stock slid from its 2025 peak.

So, when AI demand looks shaky, even slightly, Oracle's debt-funded spending starts looking risky as well. And that is the scenario that played out on Friday, June 5.

What the jobs report added to Oracle's bad day

As the AI chip scare heated the market, a strong labor report came along and poured fuel on it.

U.S. payrolls rose by 172,000 in May, far above the roughly 80,000 economists expected, according to the Bureau of Labor Statistics.

Ordinarily, a strong jobs number is good news, but for high-growth tech, it is a threat.

Strong hiring lowers the odds of Federal Reserve rate cuts and raises the odds of a hike, and traders now see roughly a 70% chance of higher rates by end of year, according to Morningstar.

Higher rates make Oracle's heavy borrowing costlier and make far-off AI profits worth less today.

For a debt-heavy name spending billions on a multiyear buildout, that combination stings.

Why one analyst still calls Oracle stock a buy

Not everyone joined the rush for the exits.

Before the worst of the selling, Guggenheim analyst John DiFucci maintained his "buy" rating and a $400 price target, a level that would nearly double the stock from its current trading level.

His logic: OpenAI's ability to raise $120 billion in a recent funding round, plus Oracle's room to raise $45 billion or more in debt and equity, should help assuage investor concerns around the data center build-out, DiFucci said.

He is not alone in the bull camp.

Wedbush's Dan Ives recently raised his Oracle target twice in three weeks, pointing to a contracted backlog that has swelled to roughly $553 billion.

Mizuho has a $400 target, while RBC's is much lower at $250.

That wide gap between these analyst targets tells you how split Wall Street is over the chances that Oracle's spending will pay off.

What Oracle investors should watch before June 10 earnings

The next test arrives quickly.

Oracle reports fourth-quarter fiscal 2026 results on Wednesday, June 10, after the close, the company confirmed.

For a stock this jumpy, that report can swing the shares sharply in either direction.

Key Oracle signals to watch on June 10

Cloud infrastructure growth: Oracle Cloud Infrastructure revenue grew 84% in the third quarter, CNBC reported. Investors want that pace to hold.
Backlog conversion: Watch whether that $553 billion of contracted work is turning into actual billed revenue, not just signed promises.
Capital spending: Oracle plans upwards of $160 billion in capital spending over two years. Any sign of restraint could ease the debt fears.
OpenAI exposure: A heavy reliance on one customer is a risk if that customer's plans change.

For investors, the read is simple.

Oracle remains a high-risk, high-reward AI play, and Friday showed how fast the risk side can take over.

Anyone buying at current price levels is betting that the backlog converts to cash before the debt becomes a problem, and June 10 is the first hard look at whether it will.

The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.

This story was originally published June 8, 2026 at 3:03 PM.