Oracle is making room in its budget for aggressive AI infrastructure expansion by trimming its workforce, but Wall Street remains cautious about whether this approach will pay off.
On Monday, Oracle officially launched a new round of layoffs, with some teams seeing cuts of up to double-digit percentages, according to internal emails and statements from three affected employees reported on September 14. When the news broke, Oracle's stock dropped over 5% during the day before paring losses to close at $144.72, bringing its year-to-date decline to roughly 25%.
This latest job reduction continues a series of cuts Oracle has made throughout the year. Last Friday, the company revealed it had expanded its ongoing corporate restructuring plan, adding $700 million for employee severance and layoff costs to cope with the financial strain of heavy AI infrastructure investment.
Workforce shrinks by over 20,000 this fiscal year
According to recent regulatory filings, Oracle's total headcount for the fiscal year ending May 31, 2026 has dropped by about 21,000 employees compared to the same period last year, a decrease of roughly 13%, putting the current workforce at about 141,000. On Monday, numerous posts appeared on platforms like LinkedIn, Reddit, and Blind, with many users saying they were affected by this round of cuts. Earlier coverage indicated Oracle had drawn up a new layoff plan targeting salary cost reductions.
CFO Hilary Maxson has previously told analysts that internal "simplification and efficiency measures" are key to controlling operating costs and protecting profit margins. Behind this drive to cut labor costs is Oracle's massive capital bet on AI infrastructure. The company's capital expenditures hit $28.5 billion in the first fiscal quarter, far surpassing the $8.5 billion from the same period last year, and it has maintained its capital expenditure forecast of $90 billion to $95 billion for fiscal 2027.
Maxson explained on the earnings call that these funds will go directly toward purchasing AI racks, cooling systems, and network equipment from suppliers. To support this expansion, Oracle has raised tens of billions of dollars through large-scale debt issuance.
Wall Street remains doubtful; valuation upgrade hinges on profit margin conversion
Even though Oracle's latest earnings report showed some positive signals, Wall Street is still cautious about the returns on its AI investments. Morgan Stanley analyst Sanjit Singh maintained a "neutral" rating on Oracle with a $210 price target in his latest report. Morgan Stanley noted that the gross margins and free cash flow conversion of the AI infrastructure business are the key factors determining whether Oracle's valuation can shift from "neutral" to "overweight."
Separately, a regulatory filing from September 11 revealed that Oracle founder Larry Ellison has canceled a 10b5-1 stock trading plan adopted on June 22, 2026. The plan would have allowed him to sell up to 50 million Oracle shares—worth about $7.5 billion—by October 24. Oracle confirmed that Ellison has not sold any shares, but the company has not yet publicly explained the reason for canceling the plan or disclosed any alternative selling arrangement.