Tech Giants Face AI Scrutiny Next Week
Legacy tech firms Oracle and Adobe face a critical test as they report earnings next week. Oracle, with shares down 50% from their peak, is under pressure to show returns on AI investments, while Adobe faces concerns about AI disrupting its software models—a trend some are calling the "SaaSpocalypse."
All eyes are on the growth of Oracle's Cloud Infrastructure (OCI) unit, which recently surged 66% year-over-year, outpacing rivals like Amazon AWS and Microsoft Azure. Analysts are now watching to see if OCI can sustain growth above 40% as the company works through a massive backlog of over $523 billion, driven by major AI contracts with OpenAI, Meta, and Nvidia. To fuel this AI expansion, Oracle is undertaking a significant capital raise, bringing in $25 billion in debt and $25 billion in equity to fund data center construction. This aggressive spending has led to a cash crunch and reports of thousands of job cuts, a move analysts see as a way to offset rising infrastructure costs rather than a reaction to falling demand. Adobe is fighting a different battle, with its stock down roughly 57% from its peak amid fears of a "SaaSpocalypse," a narrative that generative AI could render traditional software subscriptions obsolete. This anxiety intensified across the software sector after AI startup Anthropic released tools that can automate complex professional workflows, sparking a sell-off. In response, Adobe has integrated its own generative AI, Firefly, into its product suite, attracting over 6 million monthly active users and adoption by more than 75% of Fortune 500 companies. The company reported that its Firefly-powered marketplace generated $50 million in 2026, and that over 15% of new Creative Cloud subscribers cite the AI tools as a key reason for purchasing. Despite the stock's plunge, Adobe's recent financial performance has been strong, reporting a record $6.2 billion in revenue for the fourth quarter of 2025, an increase of over 10% year-over-year. The company also generated over $10 billion in operating cash flow in fiscal 2025, using it to repurchase nearly $12 billion of its own shares. Wall Street remains divided on both companies' prospects. Analyst ratings for Adobe are mixed, with a consensus "Hold" reflecting uncertainty over the long-term AI threat. Meanwhile, though some analysts have trimmed their price targets for Oracle due to execution risk, the consensus rating remains a "Strong Buy," showing faith in its AI infrastructure strategy.
