Oracle sells $20 billion in stock and bonds to support AI effort
Oracle on Monday announced plans to raise $20 billion through bond and share sales, as the software giant seeks to engage investors to finance its significant investments in AI and cloud infrastructure development. Oracle priced the offering of 86.2 million shares at $116 each later in the day, reflecting an 11.2% discount to Friday’s closing price. The company is set to generate approximately $10 billion from the equity issuance and an additional $10 billion via debt instruments with maturities ranging from 2029 to 2046. Shares of the company declined by 8.8% to $119.22 following the fundraising announcement earlier on Monday, resulting in a total loss of approximately 39% for the year.
Oracle stated that it would allocate the proceeds for various corporate purposes, encompassing capital expenditures, debt repayment, acquisitions, dividends, and share repurchases. The fundraising highlights the magnitude of Oracle’s investment in AI as it aims to increase revenue by more than threefold by fiscal 2030. The company announced last week that capital spending is expected to reach its zenith in this fiscal year and the next, while committing to limit additional AI financing to no more than $20 billion through fiscal 2030. Shares experienced an approximate 11% increase on Wednesday following remarks from CFO Hilary Maxson, who indicated that Oracle anticipates free cash flow to become positive in the latter half of fiscal 2028.
As of August 31, Oracle reported $125.34 billion in notes payable and other borrowings, juxtaposed with fiscal 2026 revenue of $67.36 billion. It anticipates revenue to surpass $225 billion and adjusted earnings to exceed $21 per share in fiscal 2030. Wall Street anticipates that the company’s adjusted profit per share for fiscal 2027 will reach $8.14, based on data compiled by LSEG. The bond offering consists of five fixed-rate tranches with interest rates varying from 7% to 8.65%, maturing between 2029 and 2046.
The final debt offering excluded the floating-rate tranche that Oracle had specified in a previous regulatory filing. Oracle’s existing 6.85% bonds due in 2066 experienced a decline of over 1.2 cents on the dollar, as indicated by Tradeweb data. Investors are concentrating on Oracle’s expenditures in AI, given its comparatively smaller revenue scale relative to cloud competitors Microsoft and Amazon, alongside its considerable exposure to OpenAI, the unprofitable creator of ChatGPT.
