• Oracle (ORCL)'s data center delays for its OpenAI partnership, part of a $300 billion deal, push timelines from 2027 to 2028 due to labor and material shortages, exacerbating execution strains.
  • Evercore ISI maintains an Outperform rating with a $275 price target, viewing the issues as short-term, with long-term leases and revenue commitments mitigating impact.
  • Shares dropped over 13% post-earnings, erasing $80 billion in value, as escalated data center leases raise debt market concerns earlier than mid-2026.

Oracle, the Austin-based technology giant specializing in cloud infrastructure (OCI), is navigating significant headwinds as delays hit multiple data centers critical to its partnership with OpenAI. According to people familiar with the matter, these setbacks, driven by labor shortages and supply chain bottlenecks, have shifted completion dates from 2027 to 2028, particularly at sites like Michigan. This comes amid a broader hyperscaler boom, where Oracle joins peers like Google (GOOGL) and Amazon (AMZN) in absorbing 60-70% of data center capacity, but faces extended timelines of 2-6 years due to power constraints and Nvidia (NVDA) GPU supply issues.

In its latest 10-Q filing, Oracle disclosed escalated data center leases totaling $248 billion, up 150%, which has raised odds of earlier debt market entry than the mid-2026 timeline previously anticipated. The company reported Q2 FY2026 revenue of $16.1 billion, up 14% year-over-year, with cloud revenue at $8.0 billion, surging 34%. However, negative free cash flow of $10 billion and a stock decline to around $187 have fueled investor skepticism. Efforts to restructure its debt have hit a snag, with credit default swaps rising as market reaction turns cautious.

Evercore ISI analyst Kirk Materne reaffirmed an Outperform rating and $275 price target, noting that Oracle only pays for leases once data centers are delivered. He emphasized that the long-term leases of 15-19 years translate to manageable costs relative to projected GPU cloud revenue, with commitments covering 65% of the OCI revenue ramp through FY29. "While the delay isn't ideal given recent stock moves, it is unlikely to materially impact Oracle's overall cloud revenue growth," Materne said in a note. Attempts to reach Oracle for comment on the delays were unsuccessful.

The delays pressure stakeholders across the board: OpenAI risks delays to its GPT-5.2 timelines, while Oracle's healthcare and finance clients may face slower AI scaling. Historically, similar issues have plagued hyperscalers, such as Google's Texas build-out and Amazon's Ohio investments, due to post-2024 supply chain disruptions. Oracle plans $10 billion in capex for 2025 expansions, mirroring earlier strategies, but without a deal to accelerate timelines, the company could see further stock volatility.

Looking ahead, Oracle's positioning in the projected $1 trillion AI market by 2028 remains strong if it can convert its backlog into scale, supported by partnerships like Crusoe for power solutions. The company maintains an investment-grade rating, but short-term risks include higher debt needs and capex pressures. In a related development, tech giants leased more data center capacity in Q3 2025 than all of 2024, led by Oracle, highlighting the intense competition and infrastructure demands.

Correction: An earlier version misstated the free cash flow figure; it has been updated to negative $10 billion.