Oracle taps investors for US$20 billion to finance AI expansion

Oracle aims to raise US$20 billion to fuel its AI and cloud infrastructure expansion, according to recent filings. The company plans to utilize bond and share sales for this purpose, with shares falling 8.8% to US$119.22, marking a 39% loss for the year. Oracle intends to allocate the funds towards general corporate activities, encompassing capital expenditure, debt repayment, acquisitions, dividends, and share buybacks.

The share sale is anticipated to be priced at US$116 per share, an 11% discount to Friday's closing figure. The fundraising effort highlights Oracle's substantial investment in AI, with the company targeting to more than triple its revenue by fiscal 2030. Oracle disclosed in a recent update that capital spending will peak in the current fiscal year and the next, while pledging not to exceed US$20 billion in additional financing for AI through fiscal 2030.

In a recent development, shares surged approximately 11% on Wednesday following CFO Hilary Maxson's assertion that Oracle anticipates free cash flow to become positive in the second half of fiscal 2028. As of August 31, Oracle held US$125.34 billion in notes payable and other borrowings, compared to fiscal 2026 revenue of US$67.36 billion.

The company expects revenue to surpass US$225 billion and adjusted earnings to exceed US$21 per share by fiscal 2030. Wall Street anticipates Oracle's adjusted profit per share for fiscal 2027 to reach US$8.14, based on data compiled by LSEG. The bond offering consists of six tranches, maturing between 2029 and 2046, including one floating-rate tranche and five fixed-rate tranches.

The specific interest rates, prices, and number of shares have yet to be determined. Oracle's existing 6.85% bonds due in 2066 experienced a decline of more than 1.2 cents per dollar. Investors have focused on Oracle's AI spending due to the company's limited revenue compared to cloud giants Microsoft and Amazon, as well as its significant reliance on OpenAI, the loss-making creator of ChatGPT.