Oracle’s Ambitious Funding Drive to Power AI Expansion

Oracle US68389X1054

The technology giant Oracle is preparing a substantial capital raise, targeting between $45 billion and $50 billion by 2026. This move is driven not by abstract growth ambitions but by a concrete operational necessity: delivering on contractual commitments to provide AI data center capacity for a roster of major clients.

Oracle’s strategy involves a balanced mix of financing instruments. The initiative commenced with a $25 billion bond offering on February 2. Alongside traditional debt, the company plans to utilize equity-linked vehicles, including mandatory convertible preferred shares. Furthermore, a newly authorized at-the-market (ATM) equity program, which could raise up to $20 billion, forms a core part of the plan.

Key Financial Details:
- Total Target (2026): $45–50 billion
- Initial Bond Offering: $25 billion
- ATM Equity Program: Up to $20 billion
- Financing Mix: Combined debt and equity-linked instruments

The primary use of these funds is a massive expansion of cloud infrastructure. Oracle is contractually obligated to meet the surging demand from several high-profile AI-focused companies, a list that includes Nvidia, Meta, OpenAI, AMD, TikTok, and xAI. According to Fitch Ratings, these multi-year commercial agreements lock Oracle into providing specific AI computing resources.

Market Reactions: A Tale of Two Audiences

The response from credit markets has been notably positive. The company's 5-year credit-default swaps tightened by 17%, as reported by CNBC, signaling that investors perceive a lower risk of a credit rating downgrade. Analysts attribute this confidence to the inclusion of equity financing, which alleviates pressure on Oracle's balance sheet compared to a pure debt load.

Barclays upgraded its view on Oracle’s bonds to "overweight," citing that the equity component reduces downside risks for creditors. Fitch assigned a BBB rating with a stable outlook to the company's key unsecured notes.

However, the equity market tells a more cautious story. The potential dilution from issuing new shares, particularly through the $20 billion ATM program, has unsettled some investors. UBS analysts cautioned that raising $20 to $25 billion from stock sales "may not be well received by all shareholders."

This concern is reflected in recent price action and analyst adjustments. Over the past 30 days, Oracle's shares have declined approximately 24.5%, with the current price at $145.35. While Scotiabank maintained an "outperform" rating, it reduced its price target from $260 to $220, citing persistent worries over the company's capital requirements.

The Path Ahead: Execution and Earnings

Moving forward, the market will closely monitor two critical factors. First, the speed at which Oracle can convert its promised AI capacity into profitable revenue. Second, the actual impact of the equity fundraising on existing shareholder value through dilution. The next significant milestone will be the quarterly earnings report expected on March 9, 2026, which may offer early indications of whether the costly infrastructure expansion is translating into measurable cloud business momentum.

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