Oracle Stock Pressured After Michael Burry Alleges Earnings Inflation
The 'Big Short' investor accuses the tech giant of artificially boosting profits by understating the depreciation of its massive cloud and AI infrastructure assets.
Oracle Corp. (ORCL) shares faced renewed pressure after Michael Burry, the investor famed for his prescient bet against the 2008 housing market, publicly accused the software giant of overstating its earnings by manipulating depreciation schedules for its technology assets.
The critique, leveled in a series of posts on the social media platform X, alleges that Oracle is part of a wider trend among technology companies to inflate profits by extending the declared useful life of critical hardware. "Understating depreciation by extending useful life of assets artificially boosts earnings - one of the more common frauds of the modern era," Burry stated.
His analysis specifically targets the aggressive capital expenditures powering the artificial intelligence boom. Burry contends that computing and networking equipment, such as high-performance servers and chips, have a realistic product cycle of only two to three years. By stretching the depreciation period beyond this, companies can report lower annual expenses, thereby boosting their net income figures.
For Oracle, Burry projected the impact could be substantial, estimating its earnings may be overstated by as much as 26.9% by 2028. In afternoon trading, Oracle shares were trading around $240.83, a modest gain on the day but still nearly 25% below their 52-week high of $345.12, reflecting broader market volatility and investor concern over the cost of the AI arms race.
Burry's claims strike at the heart of Oracle's current strategy, which involves a multi-billion dollar investment in its Oracle Cloud Infrastructure (OCI) to compete with rivals like Amazon Web Services, Microsoft Azure, and Google Cloud. While Oracle has touted major contracts and robust demand for its AI and cloud services, some analysts have grown cautious about the financial implications of this build-out.
Earlier in the week, analysts at Erste Group downgraded Oracle to "Hold" from "Buy," citing the sharp rise in debt—totaling over $111 billion—and negative free cash flow directly linked to its significant cloud investments. Burry's allegation adds a new layer of scrutiny to Oracle's financial reporting at a time when the company's $682 billion market capitalization hinges on the perceived success of its capital-intensive cloud transition.
The accusation from the Scion Asset Management founder is part of a broader warning about the tech sector. Burry estimated the practice could lead to a cumulative $176 billion understatement of depreciation across major tech companies between 2026 and 2028, suggesting a systemic issue rather than an isolated one.
Despite the high-profile criticism, Wall Street has not uniformly soured on Oracle. The company holds a "Moderate Buy" consensus rating from analysts, with an average price target of $344.04, implying significant upside from its current levels. This view is largely based on Oracle's ability to secure large-scale AI training contracts and the long-term potential of OCI. However, the company's most recent quarterly earnings showed a year-over-year growth decline of 1.9%, indicating potential headwinds.
Oracle has not yet issued a public response to Burry's claims. Investors and regulators will likely be watching the company's future financial statements closely for any changes to its accounting assumptions. Burry, known for his meticulous research, has promised to release more detailed information on his findings on November 25, 2025, setting the stage for continued debate over the true profitability of the cloud and AI gold rush.