Oracle to raise up to $50 billion in debt and equity this year

By Brody Ford and Se Young Lee, Bloomberg

Oracle Corp. plans to raise $45 billion to $50 billion this year through a combination of debt and equity sales to build additional cloud infrastructure capacity, reflecting the scale of financing needed to feed AI’s growth.

The company is raising money to build additional capacity to meet the contracted demand from the company’s largest cloud customers, including Advanced Micro Devices Inc., Meta Platforms Inc., Nvidia Corp., OpenAI, TikTok Inc. and xAI Corp., the company said in a statement Sunday.

On Monday, it kicked off a US dollar bond offering that is expected to be about $20 billion to $25 billion, according to people with knowledge of the matter, who asked not to be identified because they’re not authorized to speak publicly.

The announcement and bond sale coincide with persistent fears about whether massive artificial intelligence-linked investments by tech companies such as Oracle will pay off. Oracle in particular has become a barometer on sentiment about a possible AI bubble. The company’s stock has fallen around 50% from its record price on Sept. 10, wiping out roughly $460 billion in market value.

 

Oracle’s plans to raise as much as $50 billion this year “may not be a panacea for all long-term financing and return on investment concerns,” wrote Bloomberg Intelligence analysts Robert Schiffman and Alex Reid in a note on Monday, but they “highlight management’s commitment to high grade ratings by utilizing a considerable amount of equity to meet its needs.”

Oracle shares rose by as much as 4% after markets opened in New York on Monday.

Developing AI data centers has pushed Oracle’s free cash flow negative, where it is expected to stay until 2030, according to data compiled by Bloomberg. The company is on the hook for tens of billions of dollars in spending in the coming years, largely on semiconductors and leases.

“If Oracle can complete the raise successfully it will start digging itself out of the considerable hole it has found itself in,” said Gil Luria, an analyst at DA Davidson & Co.

The company plans to raise half of the funds via equity-linked and common equity issuances, including mandatory convertible preferred securities and through an at-the-market equity program of as much as $20 billion.

Issuing equity would help send a message to the market that Oracle is serious about maintaining its investment-grade debt rating, wrote John DiFucci, an analyst at Guggenheim, in a January note.

The rest of its funding target is set to be raised via a single issuance of bonds early in 2026. The company sold $18 billion of bonds in September, in what was one of the year’s largest corporate bond offerings.

But the debt market may not have an appetite for this much investment-grade debt from Oracle given its existing commitments and trading in its credit default swaps, Luria said. Issuing equity may also hurt the company’s stock price, he said.

Bank of America Corp., Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and JPMorgan Chase & Co. are managing the bond offering, according to a filing.

As Oracle debt swelled and Wall Street raised concerns of an artificial intelligence bubble, investors rushed to the derivatives market to buy protection against Oracle defaulting on its debt. By December, that demand pushed prices on some credit default swaps to the highest since the 2008 financial crisis.

A key part of Oracle’s cloud investment is its contract with OpenAI, which has committed to spending about $300 billion to rent servers from Oracle. OpenAI is not profitable, adding to worries about the financial strains from huge capital expenditures without a clear timeline for meaningful returns.

Making this significant of an announcement on a Sunday afternoon was unusual for a mature company like Oracle. The timing, “could be the management team trying to stop the endless slide in the share price by trying to give investors some hope ahead of Monday’s open,” Luria said.

–With assistance from Mayumi Negishi and Mark Anderson.

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