Oracle (NYSE:ORCL) stock dropped on Wednesday amid reports indicating the company has begun cutting jobs in its cloud unit as it works to rein in costs amid heavy AI infrastructure spending.

People familiar with the matter said the company informed affected employees this week that their positions were eliminated, with some cuts tied to performance issues.

The unit is still hiring in other areas, Bloomberg reported on Wednesday.

Also Read: Oracle’s AI Ambitions Take Flight After Record Cloud Growth: What Do Analysts Really Think?

The move follows similar cost-control efforts by Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), and Meta Platforms (NASDAQ:META), which have each reduced headcount this year to offset surging AI-related expenses.

Microsoft plans to let go of at least 6,000 positions in 2025. Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) Google targeted a voluntary exit program for over 25,000 employees in its Platforms and Devices division in 2025.  

Oracle’s cloud business has been a key growth driver, recently securing a record-breaking deal with OpenAI for about 4.5 gigawatts of U.S. data center power.

However, the company faces tens of billions of dollars in obligations to build massive server farms to meet AI demand, and it posted negative free cash flow for the fiscal year ending in May.

In June, Oracle disclosed that workforce adjustments may occur due to strategy changes, reorganizations, or performance concerns.

Oracle stock gained over 49% year-to-date. Bank of America Securities analyst Brad Sills expressed bullishness over Oracle’s prospects, citing growing optimism around the AI investment cycle. He said Oracle benefits as big tech companies accelerate AI-driven capital spending.

Sills pointed to Microsoft’s fiscal 2026 first-quarter capex guidance of over $30 billion, well above his $23.5 billion estimate, and Meta Platform’s (NASDAQ:META) increased full-year capex target of $69 billion as clear signals of robust AI infrastructure demand.

In BofA’s Agentic AI Handbook, he estimated the total addressable market for agentic AI-related services to be $155 billion, roughly 8% higher than the existing software total addressable market (TAM).

While Sills sees Oracle as a potential beneficiary of the next wave of AI adoption, he kept his Neutral rating due to valuation concerns and uncertainty over how much AI demand will lift revenue.

ORCL Price Action: Oracle stock is trading lower by 3.11% to $245.96 at last check Wednesday.

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