Oracle Is Slashing Payroll While Borrowing Billions for AI. What It Means for ORCL Stock.

Oracle (ORCL) is in the limelight again, slashing jobs with one hand while it borrows billions of dollars with the other hand. The company has started another round of layoffs, with affected employees receiving termination notices beginning Sept. 14 as the company pushes ahead with a broader restructuring plan. Meanwhile, it faces an $89 billion debt problem that investors cannot overlook.

While this may appear counterintuitive, there is a clear bet behind it. Oracle is shrinking some costs so it can redirect more resources towards its AI cloud infrastructure business that is growing at extraordinary speed. Oracle stock is down 28% so far this year, underperforming the broader market. For Oracle investors, the question today is whether this gamble will pay off and whether Oracle is still worth investing in.

The Layoffs Can Improve Efficiency — But There Is A Catch

Oracle has started another round of layoffs this week. The new layoffs come after Oracle's workforce had already fallen by roughly 21,000 employees, or 13%, during fiscal 2026, leaving the company with about 141,000 employees as of May 31. The timing is notable, as Oracle announced recently that it expects fiscal 2027 capital expenditures to increase to around $90 billion to $95 billion. Capex reached $28.5 billion in the first quarter of fiscal 2027, compared to $8.5 billion in the same quarter a year earlier.

Cutting payroll doesn't magically make AI infrastructure cheaper. However, it reduces operating expenses, giving Oracle more flexibility to absorb the enormous costs associated with expanding OCI. However, restructuring itself creates near-term costs. According to Reuters , Oracle's restructuring program is expected to cost roughly $2.8 billion after the company increased its projected restructuring expense by another $700 million.

The Profits Are Growing, But So Is the Cost of Chasing AI

For the time being, it appears Oracle's restructuring efforts are paying off. Profitability is moving in the right direction. In the first quarter of fiscal 2027, adjusted operating income climbed 31% to $8.2 billion, while adjusted earnings per share (EPS) rose 30% to $1.92. However, gross margin declined as the company is ramping up data centers and rapidly increasing the contribution from infrastructure, which is more capital-intensive than its traditional software business. Management said the lower operating expenses due to workforce reduction helped somewhat to mitigate the margin pressure.