AI data center expansion costs surge, Oracle plans to lay off thousands to cut expenses

Oracle is planning to cut thousands of jobs as a measure to address cash flow pressures caused by the large-scale expansion of AI data centers.

According to media reports citing insiders, these layoffs will affect multiple departments and may begin as early as this month. Some of the layoffs will focus on roles expected to see reduced demand due to AI development in the future. The scale of layoffs in this plan is expected to exceed the company’s usual rolling layoffs. This week, Oracle also announced internally that it will review a large number of unfilled positions in its cloud business unit, effectively slowing down or freezing hiring.

As of the end of May 2025, Oracle has approximately 162,000 employees worldwide. The details of the layoffs are still being finalized and may change.

Following the release of the news, Oracle’s stock retraced its early gains on Thursday, falling as much as 1.5% to $150.12 during trading.

Under the leadership of Oracle Chairman Larry Ellison, the company is undertaking a historic data center construction plan to support AI computing needs for clients like OpenAI. Oracle has long been known for its database software but has been transforming in recent years by heavily developing cloud computing and focusing on AI, aiming to become a significant competitor to industry leaders Amazon and Microsoft.

Wall Street expects that spending on data centers in Oracle’s cloud division will weigh on cash flow, turning it negative over the next few years until these investments are expected to start generating returns around 2030. Last month, Oracle announced plans to raise up to $50 billion through debt and equity financing this year.

As an AI cloud service provider, Oracle’s initial strategy was well-received by investors, with the stock rising 61% in 2024 and another 20% last year. However, as costs continue to rise, market sentiment has cooled: by the close on Wednesday, the stock had fallen 54% from its peak in September 2025.

The high upfront costs associated with AI are also driving layoffs across the tech industry to balance budgets. Microsoft cut about 15,000 jobs last year amid rising spending on data centers and AI software development. Last week, Block announced it would lay off nearly half of its employees, with co-founder Jack Dorsey citing efficiency gains from AI as one of the reasons.

In September last year, Oracle disclosed in a document that it was implementing its largest restructuring plan ever, with costs potentially reaching up to $1.6 billion in the current fiscal year ending in May, including severance pay for laid-off employees. This amount is significantly higher than any similar plans previously disclosed by the company.

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