Oracle has confirmed plans to raise $20 billion from investors to support its costly expansion into AI and cloud infrastructure. The software giant executed the strategy on Monday by pricing an offering of 86.2 million shares at $116 each, representing an 11.2% discount to Friday's closing price. This equity sale is expected to generate approximately $10 billion, while a parallel debt offering will raise another $10 billion through bonds maturing between 2029 and 2046.

Following the announcement, Oracle shares dropped 8.8% to close at $119.22, marking a year-to-date decline of roughly 39%. The company stated that the proceeds would be allocated toward general corporate purposes, including capital expenditures, debt repayment, acquisitions, dividends, and share buybacks. Bloomberg News was the first to report the specific pricing details of the equity component.

The fundraising effort highlights the magnitude of Oracle's investment in AI as it strives to more than triple its revenue by fiscal 2030. Management previously indicated that capital spending would peak during the current and next fiscal years, with a commitment not to raise more than $20 billion in additional AI financing through 2030. Despite the recent sell-off, shares had rallied approximately 11% earlier in the week after CFO Hilary Maxson projected that free cash flow would turn positive in the second half of fiscal 2028.

Financial data as of August 31 shows Oracle holding $125.34 billion in notes payable and other borrowings against fiscal 2026 revenue of $67.36 billion. The company forecasts revenue exceeding $225 billion and adjusted earnings surpassing $21 per share by fiscal 2030. Meanwhile, Wall Street analysts expect adjusted profit per share for fiscal 2027 to reach $8.14, according to LSEG data.

The debt portion of the offering consists of five fixed-rate tranches with interest rates ranging from 7% to 8.65%. Notably, the final structure excluded a floating-rate tranche that had been outlined in earlier regulatory filings. In response to the news, Oracle's existing 6.85% bonds due in 2066 fell more than 1.2 cents on the dollar. Market attention remains fixed on Oracle's AI spending strategy, given its smaller revenue scale compared to cloud rivals Microsoft and Amazon, alongside its significant exposure to OpenAI, the developer of ChatGPT.

Sources: Investing.com News.