Shares of Oracle fall 10% the questions about AI spending continue

Oracle's Q2 fiscal 2026 earnings shocked the market, resulting in a significant drop in share price over 10% after-hours. The EPS came in at $2.26, beating expectations of $1.64, but revenue fell short at $16.06 billion versus an expected $16.19 billion. While cloud infrastructure revenue surged 68% year-over-year, software license revenue plummeted 21%, raising red flags about the sustainability of growth. Investors are particularly wary of Oracle's commitment to AI investments, with a $300 billion spending forecast which raises concerns about the company's increasing debt burden. Despite a strong performance in the cloud, the legacy business is showing signs of decline, evidenced by a 3% drop in total software revenue. Price action indicates that shares were already down about 25% prior to this earnings report. The stock is now trading below the crucial $200 level, which is significant for traders to monitor as the market reopens. This downturn suggests a disconnect between Oracle’s growth narrative and its current performance, emphasizing the urgency for investors to reassess their positions.