Oracle's stock is falling as investors fear a data-center setback

By Emily Bary and Christine Ji

A recent report noted that Oracle is looking to protect itself from paying some expenses if a high-profile data-center project gets delayed

Oracle's stock was down on Thursday.

Shares of Oracle dropped more than 3% on Thursday after a report flagged challenges related to a data-center project in New Mexico.

A story from Bloomberg News on Thursday morning said that Oracle (ORCL) is taking steps to protect itself from incurring heavy costs related to a New Mexico data center that's been called Project Jupiter.

The company reportedly sent a formal "force majeure" notice to developer Stack Infrastructure, a subsidiary of Blue Owl Capital (OWL). As the primary anchor tenant, Oracle is trying to insulate itself from having to make payments if the 2.45-gigawatt facility project isn't able to bring capacity online in 2028 as was expected, the report said, citing anonymous sources.

"Project Jupiter remains on our planned schedule," an Oracle spokesperson told MarketWatch. "We are fully committed to New Mexico and confident in our path forward."

The spokesperson called force-majeure notices "commonplace in developments of this scale" and said that can be used to "preserve contractual rights among project partners."

"They do not, by themselves, establish a project delay or change delivery expectations," the spokesperson added.

The company has been moving to dramatically expand data-center capacity in service of big artificial-intelligence cloud contracts. The New Mexico site specifically is related to Stargate, a high-profile venture involving Oracle, OpenAI and SoftBank (JP:9984).

But data-center development in general has hit roadblocks due to local backlash, an electricity crunch and other factors. Bloom Energy (BE), the designated fuel-cell supplier for the campus, faces operational delays after state regulators rejected route permits for a key natural-gas pipeline needed to power its on-site generators. Shares of Bloom Energy fell 3% in Thursday trading.

"As discussed with Oracle an hour ago, Oracle remains committed to Project Jupiter and its contract with Bloom to deliver 2.4 GW of fuel cell capacity. We are excited to execute Project Jupiter on Oracle's planned timeline," Bloom Energy shared in an X post Thursday.

For Oracle, delays in setting up data centers would hurt the company's ability to turn its backlog of contracted deals into revenue. The company currently has $664 billion of remaining performance obligations, or future sales not yet recognized. Half of that amount is expected to be converted into revenue in the next three years, but that timeline could come under pressure if execution stalls.

William Blair analyst Sebastian Naji flagged in a Thursday note that concerns about delays pushing back revenue recognition will remain in focus "as investors gauge the company's ability to deliver on contracted RPO." But since Project Jupiter was not expected to contribute to revenue for the fiscal year ending May 2027, Naji believes the near-term impact will be limited.

Investors are also concerned about Oracle's balance sheet, as its heavy spending has required the company to take on large amounts of debt. In the company's latest earnings report, heavy spending resulted in negative free cash flow of $5.4 billion.

Rising interest rates have made investors less interested in risky assets recently, according to Josh Wein, portfolio manager at Hennessy Funds. The increasing cost of capital will make it more expensive to borrow money. Now, he expects the reports surrounding Oracle's New Mexico data center to further contribute to investor caution.

Companies undertaking large, multiyear infrastructure projects face significant interest-rate exposure, especially with the 10-year Treasury yield elevated above 5%, Wein told MarketWatch. "You would hope that they understand what they're taking on, because it's not like revenue hits within 12 months on these developments," he said.

-Emily Bary -Christine Ji

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09-24-26 1612ET