Oracle Shares Fall 4% as Microsoft Scales Back AI Computing Capacity Lease
Key Facts
Oracle shares fell 4% on Friday, November 6, after Investing.com, citing Bloomberg, reported that Microsoft had begun scaling back an arrangement to lease AI computing capacity from the company as part of a broader review of its cloud partnerships. Reuters said the leased capacity had lost some of its value as Microsoft's needs changed, while Bloomberg reported that the company began winding it down in recent months after deciding not to renew the contract. The report concerns a specific arrangement between the two companies and does not announce an end to all of Microsoft's business with Oracle. In afternoon trading, Oracle shares were down about 3%, while Microsoft shares were broadly steady, Reuters reported. Investing.com cited the 4% decline as the stock's drop following the Bloomberg report, amid broader pressure on AI shares.
Reuters linked the decline in the capacity's value to changing Microsoft needs, noting that Oracle's hardware relied on an older generation of Nvidia chips. Investing.com said the capacity no longer met Microsoft's specifications, while Reuters described it as becoming less suited to the company's evolving needs. This places the suitability of the chip generation among the reasons for reassessing the agreement, alongside the decision not to renew the contract. An Oracle spokesperson said demand for its AI infrastructure remained strong, including for older-generation GPU units. Microsoft and Oracle did not immediately respond to Reuters' requests for comment, the news agency said.
The agreement was announced in 2023 as part of Microsoft's efforts to secure additional computing capacity to develop an AI-powered version of its Bing search engine, according to Investing.com. Bloomberg was unable to determine the agreement's full overall value, the report said. This background provides context for Microsoft's use of the capacity during a phase tied to expanding AI-enhanced search capabilities. The current report, however, concerns the lease arrangement and the decision not to renew, and does not specify how much capacity is being wound down. It also did not state the contract's value or when use of the capacity would end.
The news comes as Oracle expands its commitments in cloud and AI. Its remaining performance obligations reached $638 billion at the end of the fourth quarter of fiscal 2026, up 363% year over year and $85 billion from the previous quarter. The company said a large part of the increases recorded in the third and fourth quarters came from large AI contracts. It also said that customer prepayments and hardware provided by customers under large AI contracts totaled $75 billion, significantly reducing the capital it needs to raise for data centers. These figures do not break out Microsoft's share of the obligations or the impact of its arrangement on Oracle.
In its first-quarter fiscal 2027 results, Oracle said customer demand for AI training and inference services continued to grow faster than supply. It said it booked more than $30 billion in additional AI cloud contracts during the quarter, bringing total remaining performance obligations to $664 billion. These figures offer a more recent picture of the scale of contracts and demand reported by the company, alongside its response that demand includes older-generation GPU units. At its October 28 investor day, Oracle reaffirmed its fiscal 2027 outlook for total revenue of at least $90 billion and non-GAAP earnings per share of $8.10. Those forecasts and the company's contractual backdrop remain separate from the estimated value of Microsoft's agreement, which the report did not specify.
Oracle and Microsoft shares came under pressure during the report week after Democrats swept the midterm elections, raising concerns about tighter scrutiny of new data centers and what that could mean for the AI sector's expansion, according to Reuters. This backdrop adds context to Oracle's share move in Friday's session, alongside the report about the leased capacity. The session's decline was reported at two different times: a drop of about 3% in afternoon trading, according to Reuters, and a 4% fall following the report, according to Investing.com. The evidence did not provide an official closing price for the stock or the moves of other companies' shares in the same session. Oracle announced that its second-quarter fiscal 2027 results would be released on December 14, 2026.