Oracle layoffs will help cost savings, analysts say

Oracle stock traded slightly lower Wednesday as the multinational tech conglomerate looked to cut thousands of jobs to free up cash to build artificial intelligence data center infrastructure.

The software giant has started telling its 162,000-strong workforce that thousands of people will be affected in a new round of layoffs, two people familiar with the matter told CNBC on Tuesday.

Oracle declined to comment.

Investors remain uneasy about the company’s hefty capital expenditure on data centers that can handle AI workloads. While shares closed up nearly 6% Tuesday, Oracle’s stock is down roughly 25% so far this year.

The company announced plans in early February to fundraise up to $50 billion during the 2025 calendar year through a mixture of debt and equity, to expand capacity for contracted cloud demand from customers, including Nvidia, Meta, OpenAI, Advanced Micro Devices and xAI.

Major AI hyperscalers Alphabet, Microsoft, Meta and Amazon have also committed to capital expenditure of nearly $700 billion to fund their AI buildouts this year, which has alarmed investors as it will reduce the companies’ free cash flow without a clear promise on near-term returns.

Job cuts at Oracle will help free up cash flow, Barclays analysts said in a note Tuesday. The investment bank said it is its overweight rating of the stock.

“Given ORCL’s existing FY26 Restructuring Plan and prior reports, we do not see today’s layoffs as being a surprise to the market, which seemed to have appreciated the cost savings potential from ORCL’s actions amidst the company’s rapid build-out of AI infrastructure capacity,” the analysts said.

Barclays also highlighted that Oracle generates less profit per employee than its competitors, with workers less productive compared to the average.

The analysts expect that Oracle will triple its revenue over the next few years due to minimal headcount growth and low operating costs.

CORRECTION: This story has been updated to correct the day that the Barclays analyst note was released.