Oracle taps investors for $20 billion to finance AI expansion

Oracle, the software giant, is set to raise $20 billion through bond and share sales, according to regulatory filings released on Monday. This move comes as the company seeks capital to finance its expansive AI and cloud infrastructure expansion. The company's shares experienced a decline of nearly 5% in response to the announcement, marking a 33% drop in value this year.

Oracle plans to utilize the funds raised for general corporate activities, including capital spending, debt repayment, acquisitions, dividends, and share buybacks.

The fundraising effort highlights Oracle's commitment to AI investment, with the company aiming to triple its revenue by fiscal year 2030. In a recent announcement, the company stated that capital spending would peak in the current and next fiscal years, while committing to raise no more than $20 billion in additional financing for AI through fiscal year 2030.

Oracle's CFO, Hilary Maxson, expressed optimism during a recent earnings call, stating that the company anticipates free cash flow to become positive in the second half of fiscal year 2028. At the end of August 2023, Oracle held $125.34 billion in notes payable and other borrowings, compared to a fiscal year 2026 revenue of $67.36 billion. The company projects revenue to surpass $225 billion and adjusted earnings to exceed $21 per share by fiscal year 2030.

Wall Street has taken notice of Oracle's AI spending, given the company's relatively smaller revenue scale compared to cloud rivals Microsoft and Amazon. Oracle's exposure to OpenAI, the loss-making creator of ChatGPT, has also drawn investor attention. Analysts are closely monitoring Oracle's financial performance, with expectations for adjusted profit per share to reach $8.14 by fiscal year 2027, according to data compiled by LSEG.