Oracle Raises $20 Billion to Fuel its AI Expansion Push
Oracle announced it will generate $20 billion by selling bonds and shares, as the software giant seeks funding from investors for its expensive AI and cloud infrastructure expansion.
Later in the day, Oracle set the price for the offering of 86.2 million shares at $116 each, reflecting an 11.2% discount from Friday's closing price.
The firm plans to generate approximately $10 billion from selling shares and an additional $10 billion via debt issuances maturing from 2029 to 2046.
Company shares dropped 8.8% to $119.22 following the fundraising announcement earlier on Monday, increasing their losses this year to approximately 39%.
Oracle indicated that it would allocate the funds for general corporate uses, encompassing capital expenditures, debt repayment, acquisitions, dividends, and share repurchases.
The fundraising highlights the magnitude of Oracle's AI investment as it aims to increase revenue more than threefold by fiscal 2030. The firm announced last week that capital expenditures would reach their highest point this fiscal year and the next, while committing to not exceed $20 billion in extra AI funding through fiscal 2030.
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Shares surged approximately 11% on Wednesday after CFO Hilary Maxson 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, in contrast to its revenue of $67.36 billion for fiscal 2026. It anticipates that revenue will surpass $225 billion and that adjusted earnings will exceed $21 per share in the fiscal year 2030.
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According to data compiled by LSEG, Wall Street anticipates the company's adjusted earnings per share for fiscal 2027 to be $8.14.
The bond issuance consists of five fixed-rate tranches with interest rates between 7% and 8.65%, maturing from 2029 to 2046. The last debt issuance did not feature the floating-rate portion that Oracle had mentioned in a prior regulatory document.
Oracle's current 6.85% bonds maturing in 2066 dropped over 1.2 cents per dollar, based on Tradeweb data.
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Investors are concentrating on Oracle's AI expenditures due to its smaller revenue scale compared to cloud competitors Microsoft and Amazon, alongside its considerable reliance on OpenAI, the unprofitable creator of ChatGPT.