Investors Accuse Oracle of Hiding OpenAI Financial Risks

Suit Claims Oracle’s AI Backlog Relied Heavily on One Financially Strained Customer

Michael Novinson (MichaelNovinson) •
July 7, 2026    

See Also: Beat the Breach: Outsmart Attackers and Secure the Cloud

The lawsuit filed by a municipal retirement system in Michigan allege these undisclosed risks were particularly significant because Oracle had committed to enormous capital expenditures and long-term lease obligations to build artificial intelligence infrastructure needed to service OpenAI and other customers. OpenAI is facing internal concerns about its ability to fund massive cloud-computing commitments, the suit says.

“The Registration Statement was negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading,” the City of Sterling Heights Police and Fire Retirement System wrote Wednesday in a 20-page class action complaint filed in Davidson County Chancery Court.

Neither Oracle, OpenAI nor the City of Sterling Heights responded to ISMG’s requests for comment (see: Oracle Lands $300B OpenAI Deal – and Its Day in the Sun).

Investors: We Weren’t Told About OpenAI’s Missed Revenue Targets

Oracle attributed performance obligation growth to significant cloud contracts and portrayed this backlog as evidence of strong long-term demand for Oracle Cloud Infrastructure services, the suit said. The complaint alleges these disclosures were materially misleading because investors weren’t told that much of the backlog depended on OpenAI, whose financial performance allegedly was deteriorating.

“Executives claimed that the company was capitalizing on an historic business opportunity as a key provider of the critical infrastructure used to power the development and deployment of AI technology,” the suit says. “Executives highlighted hundreds of billions of dollars’ worth of new business that Oracle had purportedly procured from the central players in an ongoing ‘AI revolution.'”

The lawsuit claims Oracle knew that customer OpenAI had missed internal revenue targets and had failed to meet internal user-growth goals. In addition, OpenAI’s CFO had expressed concerns internally about whether the company could afford its future cloud-computing obligations, the lawsuit said. These developments materially affected the reliability of Oracle’s largest AI-related contracts, the suit said.

“OpenAI boasted a novel technology – a proprietary large language model powering OpenAI’s generative AI chatbot ChatGPT – but the company was not profitable and only generated a fraction of the revenue needed to make its promised payments to Oracle, let alone OpenAI’s numerous infrastructure commitments to other counterparties (totaling over $1 trillion),” the lawsuit says.

According to the complaint, Oracle repeatedly emphasized unprecedented AI demand, major cloud contracts and expanding customer commitments while simultaneously undertaking massive investments in new data centers and infrastructure. The lawsuit argues investors were not informed that these investments depended heavily on a customer allegedly experiencing significant financial pressure.

“Oracle was required to disclose at the time of the February 2026 Note Offering that the customer primarily responsible for the staggering RPO growth claimed in the Registration Statement – OpenAI – had missed its internal revenue and new user targets and that OpenAI’s own CFO had doubts raised about OpenAI’s ability to pay for cloud computing power such as that supplied by Oracle,” the suit said.

Investors: Oracle Failed to Comply With SEC Reporting Rules

Oracle allegedly took on tens of billions of dollars in capital expenditures, increased debt financing and more than $200 billion in long-term lease commitments to support AI infrastructure, according to the lawsuit. Investors allegedly were not informed that these investments depended on a customer whose ability to satisfy its contractual commitments was uncertain, the lawsuit says.

“Issuers are required to disclose ‘any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations,'” the lawsuit states.

The complaint alleges Oracle failed to comply with U.S. Securities and Exchange Council regulations by not disclosing known trends and uncertainties that were reasonably likely to materially affect future revenues. In addition, the lawsuit alleges that Oracle failed to adequately describe significant investment risks associated with the offering.

The lawsuit claims that Oracle violated Item 105 of SEC Regulation S-K, 17 C.F.R. §229.105, which required “a discussion of the most significant factors that made the offering risky or speculative and that each risk factor adequately describe the risk.”

The suit says Oracle’s February debt offering was marketed using offering materials that highlighted extraordinary AI-driven growth while omitting information about significant risks tied to OpenAI’s financial condition and Oracle’s dependence on OpenAI to justify its large AI infrastructure investments. The City of Sterling Heights retirement system is seeking compensatory damages and rescission for investors who purchased the notes.

“Each of the individual defendants solicited investors and otherwise promoted the February 2026 Note Offering for their own financial benefit and the benefit of Oracle,” the lawsuit states.