Oracle (ORCL) shares dropped 7.51% to $120.86 on Monday, shedding $9.81 over the course of the trading session. The decline followed the company's announcement of a $20 billion fundraising plan structured around parallel debt and equity offerings. The move renewed concerns about rising borrowing costs and the financial pressure surrounding Oracle's rapidly expanding artificial intelligence infrastructure.

Oracle Outlines $20 Billion Debt and Equity Raise

According to regulatory filings, Oracle plans to raise $20 billion through separate bond and stock offerings. The company intends to secure $10 billion through a stock sale and another $10 billion through bond issuance, although it has not yet established the offering prices, interest rates, or the number of shares involved.

Oracle said it plans to use the proceeds for a range of corporate purposes, including infrastructure spending and debt repayment. Other potential uses include acquisitions, dividends, share buybacks, and additional business investments. The fundraising is intended to support Oracle's broader expansion as demand for artificial intelligence and cloud computing services continues to increase.

The bond offering is structured across six tranches with maturities ranging from 2029 to 2046. Five of the tranches will carry fixed interest rates, while one will feature a floating rate. In the secondary market, Oracle's existing 6.85% bonds due in 2066 fell by more than 1.2 cents on the dollar.

Debt Concerns Build Around AI Infrastructure Spending

Oracle's latest fundraising plan highlights the financial demands of its artificial intelligence expansion. The company continues to invest heavily in data centers and cloud infrastructure to serve major AI customers. Its growing commitments have raised questions about financing costs and the returns the company expects from these investments.

Oracle reported $125.34 billion in notes payable and other borrowings as of August 31. The company generated $67.36 billion in revenue during fiscal 2026, a comparison that underscores the scale of its existing debt relative to its annual business revenue. In raw terms, total borrowings now stand at nearly twice the company's annual revenue.

Oracle also competes with larger cloud providers, including Microsoft and Amazon, both of which operate substantial cloud businesses and hold significant resources for expanding artificial intelligence infrastructure. Oracle additionally maintains considerable exposure to OpenAI, the developer of ChatGPT, which continues to operate at a loss. That mix — larger, better-resourced rivals on one side and considerable exposure to a loss-making AI developer on the other — helps explain why Oracle's reliance on outside capital has come under close scrutiny.

Analysts at CreditSights noted that Oracle's debt trades like double-BB-rated securities even though the company holds low investment-grade credit ratings. Because double-BB territory sits below the investment-grade line, that trading pattern indicates investors are effectively applying speculative-grade standards to Oracle's credit. The discrepancy reflects growing concerns about Oracle's borrowing requirements and its exposure to large infrastructure commitments. Increased borrowing across the technology sector has also made credit markets more selective about AI-related financing. In that environment, the final terms of large bond sales like this one serve as a visible reference point for how the market is pricing AI buildouts more broadly.

Oracle Points to Positive Free Cash Flow as Spending Peaks

Oracle previously outlined plans to limit additional capital market financing through fiscal 2030, identifying $20 billion as its target for additional financing during that period. Monday's combined offerings match that amount, following management's recent clarification of its funding strategy.

The company also expects capital spending to peak during the current fiscal year and the next. Despite the elevated outlays, Oracle anticipates positive free cash flow during the second half of fiscal 2028. That projection follows an investor update that helped lift the company's shares approximately 11% last Wednesday.

Looking ahead, Oracle aims to grow revenue beyond $225 billion by fiscal 2030 and expects adjusted earnings to exceed $21 per share during that period. For fiscal 2027, analysts currently project adjusted earnings of $8.14 per share, according to LSEG data.

Oracle's shares have fallen more than 60% from their September 2025 closing peak. The decline reflects concerns about the company's ability to generate sufficient returns from its AI investments, while its substantial borrowing requirements continue to add pressure to its financial outlook. The immediate checkpoint is the setting of final terms for both offerings, which will turn the plan's broad structure into a concrete measure of what the expansion actually costs to finance.

Source: Blockonomi