After months of speculation about the scope of Oracle’s layoffs, the company has confirmed it cut 21,000 employees, or 13% of its workforce, over the past year. In its annual report this week for the fiscal year ending May 31, the company said the layoffs were primarily the result of increased investment in AI as part of a broader restructuring plan.
Oracle also signaled in the report that its AI-based layoffs may not be over, stating that “adoption and deployment of AI technologies across our operations have resulted, and may continue to result, in reductions to our workforce.”
IT teams need new skills in the AI era
Jim Frey, principal analyst at Omdia, forecasts that more AI-based layoffs are to come as major tech vendors continue to ramp up their AI deployments. IT professionals who want to avoid layoffs will need to upskill to navigate the AI era, he added.
“These macro shifts further illuminate the need for IT professionals at all levels to engage with AI technologies, learn how to use them and take an active role in projects to roll them out for the organizations they support whenever possible,” Frey said.
In its annual report, Oracle acknowledged that employees with business, product development or technical expertise combined with strong AI skills are essential but difficult to come by: “… recruiting, hiring and retaining employees with expertise in the AI computing industry has become increasingly difficult … implementation of AI tools may require new skills and capabilities, and we may not be successful in reskilling current employees.”
The annual report doesn’t divulge which roles have been affected by layoffs, but the company said it is leaning on AI for automation, database administration, process optimization, more efficient business processes and to reduce labor costs, underscoring how broadly Oracle is using AI.
Rising operational costs are bad for headcount
While Oracle attributes recent layoffs directly to AI adoption, the annual report points to additional business pressures that likely contributed to workforce reductions. To reduce costs and improve efficiency, Oracle is restructuring to invest more in cloud infrastructure, cloud applications and AI services.
Oracle’s capex investments in cloud and AI in recent years have also increased operating costs, said Baron Fung, a vice president at analyst firm Dell’Oro Group.
Total generally accepted accounting principles operating expenses for Oracle increased by $7 billion in reported currency in fiscal 2026 compared with the previous fiscal year, driven largely by a $6.0 billion increase in cloud and software expenses. In addition, a $412 million increase in R&D expenses was attributed mainly increased employee-related and computer equipment expenses.
“Operational expenses are rising quickly, potentially negatively impacting profitability and cash flow,” Fung said.
He explained that the increase in operational expenses for Oracle is mostly related to:
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Depreciation expenses for data center assets;
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Higher financing costs with data center colocation partners; and
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Increased utility usage of the data center infrastructure.
“Generally, cutting headcount is the most direct way to offset these rising costs,” Fung said.
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