Key Takeaways
- SAP shares declined more than 4% following Oracle’s announcement of capital expenditures reaching up to $95 billion for fiscal year 2027
- Wall Street analysts had projected Oracle’s capex at approximately $67.7 billion, creating a significant $27 billion gap
- Oracle intends to secure close to $40 billion through a combination of debt and equity instruments in 2027
- The company’s CFO indicated that gross margins would experience a decline as data center construction intensifies
- SAP’s decline reflects both profit-taking following its AI-driven Sapphire conference momentum and wider software industry headwinds
Oracle delivered an unexpected jolt to financial markets Wednesday night, creating ripple effects that significantly impacted SAP.
Shares of SAP tumbled more than 4% Thursday following Oracle’s disclosure of capital spending intentions reaching up to $95 billion for fiscal year 2027. Wall Street forecasters had estimated approximately $67.7 billion, based on LSEG data. The substantial disparity between projections and actual guidance proved sufficient to drive Oracle’s own shares down over 10% during premarket hours.
Oracle indicated it anticipates recovering as much as $25 billion of the total $95 billion through customer reimbursements, bringing the company’s actual net expenditure to approximately $70 billion. CFO Hilary Maxson validated this number during the analyst conference call.
For financing this expansion, Oracle intends to secure nearly $40 billion via debt and equity instruments throughout 2027. This encompasses a previously disclosed $20 billion at-the-market equity offering.
Maxson additionally cautioned analysts that gross profit margins would experience a “step down” during the ongoing fiscal year as Oracle expedites its data center infrastructure rollout. Such cautionary statements typically generate investor unease, which manifested clearly in Thursday’s market activity.
Oracle’s Financial Performance Reveals Deeper Trends
Oracle’s fourth-quarter performance actually demonstrated strength in revenue generation. Total revenue reached $19.18 billion, marginally surpassing the $19.10 billion analyst consensus. Adjusted earnings per share of $2.03 exceeded the $1.96 projection.
Cloud services revenue achieved $9.9 billion, representing a 46% year-over-year increase in constant currency terms. Oracle Cloud Infrastructure revenue skyrocketed 92% to $5.8 billion. Overall software revenue decreased 2% in constant currency to $6.8 billion.
These ambitious spending initiatives emerge as Oracle strengthens its foothold in artificial intelligence infrastructure. The enterprise maintains substantial data center agreements with Meta Platforms and OpenAI, positioning it in direct rivalry with Amazon and Microsoft.
Oracle allocated approximately $55.7 billion during fiscal 2026, already surpassing its original $50 billion objective. The 2027 forecast dwarfs that previous spending level.
Understanding SAP’s Collateral Damage
SAP released no earnings. It missed no targets. However, as Oracle’s primary European software competitor, SAP often experiences sympathy movements when Oracle faces volatility.
The SAP selloff was also partially self-inflicted. Shares had gained considerable momentum following its AI-centric Sapphire conference held earlier this year, and certain investors were already seeking opportunities to realize profits. Oracle’s capex revelation provided that catalyst.
Additional structural concerns exist as well. Market participants have been monitoring SAP’s internal artificial intelligence implementation roadmap with measured doubt, questioning whether the enterprise can successfully scale its stated objectives.
SAP’s year-to-date return was already negative by approximately 25% entering Thursday’s session, with the company maintaining a current market valuation of roughly $208.4 billion.
Analyst price targets remained unchanged following Thursday’s price movement.
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