Oracle plunges 7.5% on class action lawsuit alleging securities fraud
Complaint alleges company misled investors about AI infrastructure spending risks amid regulatory scrutiny
Oracle Corporation shares tumbled 7.5% to $135.63 on Thursday after a nationally recognized law firm filed a class action lawsuit alleging the software giant violated federal securities laws by misleading investors about its artificial intelligence infrastructure strategy.
The complaint, filed by Bronstein, Gewirtz & Grossman, LLC, accuses Oracle and certain officers of misrepresenting or failing to disclose that the company's AI infrastructure strategy would result in significant capital expenditure increases without corresponding near-term revenue growth. The lawsuit further alleges that the substantially increased spending created serious risks concerning Oracle's debt and credit rating, free cash flow, and its ability to fund projects.
Investors who purchased Oracle securities between June 12, 2025, and December 16, 2025, are covered under the class action, with a lead plaintiff deadline of April 6, 2026. Multiple law firms have issued similar investor alerts urging shareholders to evaluate their legal options.
The dramatic decline extends Oracle's recent downward trajectory, with the stock now trading well below its 50-day moving average of $195.47 and 200-day moving average of $219.60. Despite the drop, Oracle's market capitalization remains substantial at approximately $473 billion, reflecting the company's dominant position in enterprise software and cloud computing services.
Thursday's sell-off compounds existing pressure on Oracle's data center expansion strategy. Bloomberg reported that Michigan's Attorney General has urged regulators to reconsider Oracle's data center power plans, adding another layer of regulatory scrutiny to the company's ambitious infrastructure buildout.
The lawsuit allegations strike at the core of Oracle's AI pivot, which has been a major focus for investors driving the stock to a 52-week high of $344.21. Oracle's aggressive capital expenditures on AI infrastructure have been central to its growth narrative, with the company recently conducting what analysts described as a "blockbuster" bond sale to finance AI-related investments.
Despite the recent legal and regulatory headwinds, Oracle's fundamental performance remains strong. The company reported quarterly earnings growth of 90.9% year-over-year and revenue growth of 14.2% in its most recent quarter ended November 30, 2025. Analysts maintain a largely positive outlook, with an average target price of $288.26 and 30 out of 43 analysts rating the stock a buy or strong buy.
The company's price-to-earnings ratio has compressed to 31.77 from significantly higher levels during its recent rally, while the forward P/E stands at 24.75, suggesting investors may be pricing in slower growth ahead. Oracle's return on equity of 69% and profit margin of 25.3% demonstrate the company's operational efficiency even as it navigates these challenges.
Oracle's bond sale earlier this week, which Goldman Sachs analysts suggested could spur a wave of AI-related borrowing across the technology sector, now appears more controversial in light of the lawsuit's allegations about debt risks. The complaint specifically highlights concerns about Oracle's credit rating and ability to service the debt incurred through its aggressive infrastructure spending.
For investors who purchased Oracle shares during the specified class period, the lawsuit represents a potential avenue for recovering losses, though lead plaintiff participation is not required to share in any recovery. The law firm represents investors on a contingency fee basis, meaning they will only receive payment if the litigation is successful.
The coming weeks will be critical for Oracle as it responds to these allegations while continuing to execute its AI strategy. With regulatory scrutiny intensifying and legal challenges mounting, the company's ability to demonstrate that its massive infrastructure investments will generate the expected revenue growth will be essential to restoring investor confidence.