Oracle’s $1.8b layoffs are an example of the age-old saying, ‘you have to spend money to make money’

“You have to spend money to make money” is one of the most painful adages in business.

Oracle’s recent layoffs are especially exemplary of this paradox.

The enterprise software giant disclosed last month via an annual regulatory filing that its global workforce had fallen by 21,000 from May 2025 to May 2026, to around 141,000. It previously announced in late March plans to lay off 20,000 to 30,000 workers.

The company also disclosed that restructuring costs, including employee severance, contract terminations, and other exit costs, had nearly quadrupled, from $374 million in FY2025 to $1.8 billion in FY 2026, as Oracle implemented a new restructuring plan during that period. Total costs are estimated to be as high as $2.1 billion as the company continues restructuring.

The restructuring plan was, according to the filing, approved and implemented to “improve operational efficiencies.” But also to increase its liquidity: It accumulated around $130 billion in debt as of the end of May, with reported capital expenditures of around $56 billion in its last fiscal year—a 162% increase from the year prior—and expects expenditures to reach $95 billion in FY2027 as it ramps up its AI infrastructure investments. Oracle brought in $67.4 billion in revenue in FY2026.

The company appears to have found savings in headcount reduction: Layoffs affecting 20,000 to 30,000 employees could save $8 billion to $10 billion, analysts predicted in January.

“This is the cost of cost-cutting; you have to spend money to stop spending money,” Jason Schloetzer, an associate professor of accounting at Georgetown University’s McDonough School of Business, told HR Brew via email. “The asymmetry between immediate employee severance costs and later savings makes restructuring a consequential management decision.”

It’s not all AI, though. Some have attributed Oracle’s layoffs to its AI investments. The company in February announced plans to raise $45 billion to $50 billion via debt and equity financing to build out its cloud infrastructure to support a roster of high-profile customers like OpenAI, Nvidia, and Meta. And, in its annual filing, it noted that “the adoption and deployment of AI technologies across our operations have resulted, and may continue to result, in reductions to our workforce.”

But its AI investments are just part of the story, Tammy Madsen, a professor of management at Santa Clara University’s Leavey School of Business, told HR Brew. Oracle is still in the midst of its (late) transformation from a database software provider to a cloud provider, and sales revenue from the latter hasn’t yet made up for the loss of the latter, Madsen said.

Oracle has also struggled with its $28 billion acquisition of Cerner, a healthcare information technology provider, which it completed in 2022. Oracle set a bold vision for its acquisition, including promising to modernize electronic health records, reduce administrative burden on healthcare workers, and infuse AI tools into the software. Yet the software, now called Oracle Health, has lost dozens of top customers and seen customer satisfaction decline as it’s slogged through system upgrades and infrastructure integrations.

“They’re doing multiple things at the same time, and that’s contributing to the challenge that they’re in,” Madsen told HR Brew. “A business model transition, the arms race, and then work through an acquisition that’s underperforming.”

Now, as the company wants to expand into AI infrastructure, the Cerner acquisition has “become a very expensive tax,” Madsen said. It’s likely most AI firms investing heavily in infrastructure and data centers aren’t carrying the debt load that Oracle has accumulated, she added.

As such, the layoffs “look a lot less like optimization and more like an attempt to close a value creation gap” from the Cerner purchase. In fact, a large portion of the workers laid off this past spring and in earlier RIFs were reportedly in its health business.