Oracle seeks $20bn from investors to finance AI expansion

Capital expenditure more than doubled to $55.7bn in the 2026 financial year

Oracle plans to raise $20bn through share and bond offerings to fund its AI infrastructure expansion, amid investor concerns over soaring spending, mounting debt and execution risks.

Oracle has announced plans to raise $20bn through new share and bond offerings to fund its growing AI infrastructure investments.

The technology company said in regulatory filings on Monday that it would issue $10bn in common stock and raise a further $10bn through senior debt notes.

Despite the fundraising plans having been outlined at an investor event last week, Oracle's shares fell 8.8% on Monday to $119.22, taking their losses since the start of the year to about 39%.

Oracle subsequently priced its share offering at $116 per share, representing an 11.2% discount to Friday's closing price.

The sale of 86.2 million shares is expected to generate approximately $10bn.

The debt offering will consist of five fixed-rate tranches, with interest rates ranging from 7% to 8.65% and maturities between 2029 and 2046.

Oracle said the proceeds from the latest fundraising would be used for general corporate purposes, including capital expenditure, debt repayment, dividends, share buybacks and acquisitions.

The fundraising comes as Oracle accelerates its investment in AI infrastructure to compete with major cloud providers such as Microsoft, Amazon and Google, while supplying computing capacity to OpenAI.

Once primarily known for its enterprise software business, Oracle has significantly expanded its datacentre and cloud infrastructure operations to meet growing demand for AI computing power.

Its capital expenditure more than doubled to $55.7bn in the 2026 financial year. According to FactSet estimates, spending is expected to increase by a further 65% to $91.9bn in the current financial year.

Oracle said last week that its capital spending would peak during the current and following financial years. It also pledged to raise no more than an additional $20bn in AI-related financing through the 2030 financial year.

The company expects its operating margin to exceed 40% by 2030.

Debt burden

Oracle's growing borrowing requirements have become another concern for investors.

The company reported $125.34bn in notes payable and other borrowings as of 31 August, compared with revenue of $67.36bn for the 2026 financial year.

Although Oracle remains investment-grade, credit rating agency S&P downgraded its rating to BBB- in July, leaving it just one level above speculative-grade, or junk, status.

Investors are particularly concerned about Oracle's ability to finance its expansion given that it has a smaller revenue base than cloud computing rivals Microsoft and Amazon. Its significant exposure to OpenAI, which is enormously unprofitable, has also attracted scrutiny.

The company is nevertheless forecasting substantial growth. It expects revenue to exceed $225bn and adjusted earnings to top $21 per share in the 2030 financial year.

Execution will determine Oracle's AI ambitions

Oracle has attempted to reassure investors that its spending will eventually translate into stronger cash generation. Chief Financial Officer Hilary Maxson said last week that the company expects free cash flow to turn positive in the second half of the 2028 financial year.

Pat Nerney, head of investment solutions at Dynasty Financial Partners, said execution would ultimately determine whether Oracle's AI investment strategy succeeds.

"Can they do what they say they are going to do? We view this as the narrative across the AI space," he said in an email to CNBC on Monday.

"If this gets executed according to plans laid out, they will be rewarded. If they have to come back to market in the back half of '27 after telling everyone this was the last of the capital needed ... look out."