Oracle shares slide 4% on $50 billion capital raise plan
Technology giant flags massive debt and equity offering to fund AI cloud infrastructure amid surging demand
Oracle Corporation shares fell 4.1% on Monday as the technology giant announced plans to raise between $45 billion and $50 billion through debt and equity offerings to fund its ambitious artificial intelligence cloud infrastructure expansion.
The stock dropped to $153.58 in afternoon trading, wiping out roughly $19 billion in market value, as investors reacted to the prospect of significant dilution and increased leverage. The decline stands in stark contrast to the company's recent momentum, with Oracle having gained 40% over the past six months amid enthusiasm for its AI capabilities.
The capital raise includes a $25 billion bond offering, part of what the company describes as "investment-grade debt" that will help finance additional data center capacity. Oracle is aggressively building out its cloud infrastructure to meet contracted demand from major customers including AMD, Meta, NVIDIA, OpenAI, TikTok, and xAI, according to a report from Seeking Alpha.
"Oracle's monster $25 billion debt financing points to anxieties around AI funding," noted MarketWatch, highlighting the scale of the company's capital requirements in the fiercely competitive cloud infrastructure market.
The financing needs underscore the enormous cost of competing in the AI infrastructure race. Oracle reported $129 billion in orders that are five times oversubscribed, demonstrating robust demand for its cloud services. Yet the capital intensity required to convert that demand into revenue has investors questioning the company's balance sheet flexibility.
Oracle currently trades at a market capitalization of $473 billion, with a trailing price-to-earnings ratio of 31.8 times. Despite Monday's decline, the stock remains well above its 52-week low of $117.67 but significantly below its peak of $344.21 reached earlier this year.
Analysts remain broadly bullish on Oracle's long-term prospects. The company maintains an average target price of $288.26, according to market data, with 30 analysts rating it a buy versus just two selling recommendations. The strong analyst support reflects confidence in Oracle's ability to leverage its database and enterprise software relationships as it expands its cloud offerings.
Oracle's profit margins remain robust at 25.3%, with operating margins of 32%, suggesting the company has the earnings power to service additional debt. The company's return on equity stands at an impressive 69%, indicating efficient capital deployment.
The timing of the capital raise—slated for 2026—gives Oracle flexibility to navigate market conditions. The company has emphasized that the funding will support already contracted business rather than speculative expansion, reducing the risk of stranded assets if demand for AI services softens.
However, the size of the proposed offering raises questions about Oracle's cash flow generation and its ability to fund growth internally. Technology peers including Microsoft and Amazon have also committed tens of billions to AI infrastructure, but typically from stronger free cash flow positions.
Oracle's move comes as companies across the technology sector reassess their AI spending strategies. While enthusiasm for artificial intelligence remains high, investors are increasingly scrutinizing the returns on massive capital commitments and the timeline for profitability.
The company's next earnings report will be closely watched for updates on cloud revenue growth and any additional color on the capital raise strategy. Management will need to articulate a clear path to justifying the $50 billion investment while maintaining shareholder returns.