Oracle to spend $700 million more on restructuring costs as it ramps up AI spending

Oracle plans to increase its restructuring costs by approximately $700 million as part of a broader strategy to manage expenses while investing heavily in artificial intelligence (AI) services. This rise in projected restructuring expenses brings the total expected cost of the company's fiscal 2026 restructuring plan to around $2.8 billion. The increased spending is linked to the adoption of AI across various business functions and aligns with Oracle's goal of controlling costs amid the growing demand for AI solutions.

The company's stock experienced a 7.8% increase following a $26 billion rise in its revenue backlog, which helped alleviate some investor concerns about the company's debt-fueled spending. However, Oracle's shares later reversed course and closed about 2% lower as analysts pointed out that a recovery in cash flow remains some distance away.

Oracle's restructuring efforts are partially driven by the company's need to navigate a challenging period for its stock price, with investors divided between confidence in AI-driven growth and concerns over the financing of that growth. The company's shares have fallen about 23% this year, compared to a nearly 12% rise in the S&P 500 index, as investors question the viability of Oracle's costly AI bets and the sustainability of its traditional software business in the AI era.

Despite Oracle's efforts to address cash flow pressure through customer prepayments and the utilization of prepayments, analysts remain skeptical about the company's cash flow profile in the near term. Morningstar analyst Luke Yang stated that it will take years before cloud revenue reaches a scale that supports continuous capacity expansion while generating positive cash flow.

The company has sought to raise $40 billion through debt and equity financing in its current fiscal year, including a $20 billion stock sale completed in the first quarter.