Oracle aims to secure $50 billion by 2026 for cloud expansion
Oracle Corp. intends to secure between $45 billion and $50 billion this year via a mix of debt and equity sales to enhance its cloud infrastructure capacity, illustrating the substantial financing required to support the expansion of AI. Oracle is securing funding to enhance its capacity in order to fulfill the contracted demand from its largest cloud customers, which include Advanced Micro Devices Inc., Meta Platforms Inc., Nvidia Corp., OpenAI, TikTok Inc., and xAI Corp., as stated by the company on Sunday. The announcement comes amid ongoing concerns regarding the potential returns on substantial artificial intelligence-related investments made by technology firms like Oracle. The company’s shares have declined approximately 50% from their peak price on September 10, resulting in a loss of about $460 billion in market value. According to data, the development of AI data centers has resulted in Oracle’s free cash flow turning negative, a situation anticipated to persist until 2030. The company faces obligations amounting to tens of billions of dollars in expenditures over the next few years, primarily related to 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.
The company intends to secure half of the funds through equity-linked and common equity issuances, which will encompass mandatory convertible preferred securities, as well as an at-the-market equity program potentially reaching up to $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 in a January note. The remaining portion of its funding target will be secured through a single bond issuance scheduled for early 2026. In 2025, the company secured $18 billion through one of the largest corporate bond offerings of the year. “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.
Oracle stated that Goldman Sachs Group Inc. will be at the forefront of the senior unsecured bond offering, while Citigroup Inc. will take the lead on the at-the-market issuance and mandatory convertible preferred equity offering. As Oracle’s debt increased and market expressed worries about an artificial intelligence bubble, investors hurried to purchase credit default swaps linked to Oracle, which by December drove the prices of certain derivatives to their highest levels since the 2008 financial crisis. A significant aspect of Oracle’s cloud investment is its agreement with OpenAI, which has pledged to allocate approximately $300 billion for server rentals from Oracle.
OpenAI is currently not profitable, raising concerns regarding the financial pressures stemming from substantial capital expenditures without a definitive timeline for significant returns. It is uncommon for a well-established company such as Oracle to make such a significant announcement on a Sunday afternoon. 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 stated.
