🦵 Oracle kneecapped AI

Investors had two major concerns about Oracle heading into its earnings report:

• How much debt will the company need to support its ambitious capital expenditure plans?

• How quickly will these outlays turn into high-margin business?

Those worries had driven the stock down 30% from its record close on September 10, the session after its last earnings report, and fostered a surge in its credit default swap spreads. Its quarterly results weren’t that helpful in knocking back those questions.

• Oracle’s Q2 2026 results showed revenues and cloud computing sales were light compared to expectations, and that capex of $12 billion was $3.8 billion higher than the consensus estimate.

• Then, early in the conference call, management said capital spending in this fiscal year (which ends May 31, 2026) would be $15 billion higher than previously envisaged.

• Deutsche Bank’s Brad Zelnick asked, “Very specifically, how much money does Oracle need to raise to fund its AI growth plans ahead?” That the reply began with “it’s hard to answer that question exactly” was not particularly encouraging.

Ben Reitzes of Melius Research then noted that the company recently offered guidance for margins among its AI cloud customers to be in the 30% to 40% range over the life of a customer contract. “I guess my question is, how long will it take your AI margins across all your OCI data enters to ramp to that level and what needs to happen to get there?” he asked.

Oracle’s principal financial officer, Doug Kehring, began, “Look, the answer is it really depends.”

The Takeaway

What makes this answer perhaps a little unsatisfying is that recent results do not inspire much confidence in the speed of Oracle’s build-out and, in turn, its ability to turn its massive backlogged RPO into revenues.

“Oracle missing estimates on cloud infrastructure sales — up 66% in constant currency, vs. consensus of 69% — we believe were due to supply constraints that are also affecting other hyperscale cloud providers,” wrote Bloomberg Intelligence analysts Anurag Rana and Andrew Girard.

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Alphabet fell over 2% yesterday amid a confluence of bad breaks and the fact that, as we mentioned, the AI trade generally was struggling yesterday.

• OpenAI CEO Sam Altman said Google’s much-touted Gemini 3 model “had less of an impact on our metrics than maybe we feared.” This is generally not what one hopes to hear from one’s archrival. 

• Meanwhile, Waymo recalled basically all of its vehicles — 3,067 — for a software update to fix a high-profile problem they had with driving past stopped school buses.

• Disney announced a $1 billion investment in competitor OpenAI. It then subsequently sent Google a cease and desist letter accusing it of infringing Disney’s copyrights. 

The letter alleges that “Google is infringing Disney’s copyrights on a massive scale, by copying a large corpus of Disney’s copyrighted works without authorization to train and develop generative artificial intelligence (‘AI’) models and services, and by using AI models and services to commercially exploit and distribute copies of its protected works to consumers in violation of Disney’s copyrights.”

The Takeaway

The Disney news might be the worst news of the day for Alphabet; it’s never great when the most powerful company in the industry makes a compact with your rival — the agreement will grant Sora and ChatGPT more than 200 characters from Disney properties like Marvel, Pixar, and “Star Wars” — and immediately starts a fight with you. 

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Would a social media ban see chronically online teens turn to AI chatbots?

Pew Research Center published an update to its 2025 survey on teens and social media and found that record numbers of American teens are using social media like YouTube and TikTok every single day and an alarming number of teens say they were on them “almost constantly.” Perhaps more concerning, though, is Pew’s findings about young people’s AI chatbot use and what it portends for the future.

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• ♞⚓ College Football: It’s the annual Army-Navy game on Saturday, and the Midshipmen are roundly considered the favorites, with Navy having a 69% chance of victory per prediction markets* over the Black Knights.

• ✨ AI: OpenAI’s release of GPT-5.2 has shaken up the race for best AI on LMArena’s leaderboard at the end of the year. Gemini’s chances have fallen sharply to just north of 70%, with ChatGPT’s chances increasing to roughly one in four.

• 🏈 Heisman: The Heisman Trophy winner will be announced on Saturday at 7 p.m. ET, and the prohibitive favorite according to Polymarket is Indiana quarterback Fernando Mendoza, who has a 95% chance of winning the award.

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

• It’s not quite killer doll M3GAN-level, but a report found that today’s AI-powered toys are telling kids how to sharpen knives, find matches, and more

• Now that TIME has crowned the “Architects of AI” as its Person of the Year, here’s a brief visual history of the award

• The US Senate rejected competing healthcare plans as Biden-era enhanced Affordable Care Act tax credits are set to expire

• After a quarter century, Cisco surpassed its dot-com bubble closing high  

• How delivery fees are eating into tips, charted