Oracle and Google Share Prices Diverge: Capital Expenditure Expectations Move in Opposite Directions

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STAR Market Daily | Zheng Yuanfang | Editor: Ji Sheng | 2026-10-29 16:26

① Oracle has regained market favor, with its stock surging 10.73% on October 28 local time; meanwhile, Google's stock plunged more than 10% in premarket trading on the 29th. ② Oracle disclosed that it expects capital expenditures to peak in fiscal years 2027 to 2028, and to decline in fiscal year 2029; starting in the second half of fiscal year 2028, free cash flow will turn positive, and in fiscal year 2029 it will exceed $30 billion.

STAR Market Daily, October 29 — The capital expenditures and stock prices of AI cloud companies are gradually diverging.

On October 28 local time, Oracle's stock closed up 10.73%, with intraday gains at one point exceeding 13%; on the other side, as of the time of writing on October 29, Google parent company Alphabet plunged more than 10% in premarket trading.

Google, which was hit by the market's "vote of no confidence," saw both revenue and profit in its third fiscal quarter fall short of expectations, and its free cash flow situation deteriorated further, recording negative free cash flow for two consecutive quarters, indicating that its massive AI investments have yet to generate sufficient returns to justify the spending.

Oracle said that as the company's computing infrastructure continues to expand, it expects capital expenditures to peak in fiscal year 2027 (the current fiscal year) to fiscal year 2028, and to decline in fiscal year 2029.

Company Chief Financial Officer Hilary Maxson also disclosed that Oracle's free cash flow is expected to turn positive starting in the second half of fiscal year 2028, and to exceed $30 billion in fiscal year 2029.

At a time when massive AI investments are raising concerns, such statements are intended to reassure investors. Emarketer analyst Jacob Bourne said: "Oracle is trying to prove to investors that its large-scale investment in AI infrastructure is not haphazard, but follows a clear plan. These expectations are positive, and there is no guarantee they will be achieved, but these statements show that Oracle understands investors' concerns and has mapped out a relatively optimistic path to address them."

Compared with super giants like Microsoft, Amazon and Google, Oracle's revenue base appears relatively weak, while it is also highly dependent on a single customer, OpenAI. The partnership with OpenAI has brought Oracle hundreds of billions of dollars in cloud business performance obligations, and to fulfill these contracts, Oracle has had to rely on debt financing and stock issuance to raise funds to build data centers and other AI infrastructure.

Oracle pointed out on Wednesday that before free cash flow turns positive, vendor financing and customers providing hardware/paying in advance can all help the company reduce upfront cash expenditure needs. It expects that starting in fiscal year 2029, Oracle will no longer need to rely on external financing to support growth, and it expects the ratio of net debt to annual core profit to fall below 3.5 times in the same period.

As of August 31, Oracle's total notes payable and other borrowings were $125.34 billion, with cash and cash equivalents of approximately $36.37 billion. Maxson said, "I previously told everyone that for the remainder of fiscal year 2027, we will need to raise up to an additional $20 billion. Now we are announcing that of this $20 billion, debt financing and equity financing will each account for half, and this is also the last financing needed to complete the remainder of this investment cycle."

Including Oracle and Google, on October 28 local time, three major U.S. cloud companies all provided new updates on capital expenditures and cash flow, but their paths and market reactions differed.

Compared with the stark contrast between Google and Oracle, Microsoft's performance and market reaction fell somewhere in between. The company's first-quarter capital expenditures rose 30% year-on-year to $45.2 billion, below analysts' previous expectations; although free cash flow in the same period fell 27% year-on-year, it still recorded $18.63 billion. After the earnings release, Microsoft's U.S. premarket stock price rose more than 4% on October 29.

Goldman Sachs Chief Economist Jan Hatzius warned this week that investment growth by hyperscale data centers in AI is expected to peak in the coming weeks. The year-on-year change in hyperscale data center investment as a share of U.S. GDP is expected to peak in the fourth quarter of 2026 at about 1.5%.

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Cailian Press Statement: The content of this article is for reference only and does not constitute investment advice. Investors who act on it do so at their own risk.

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