Software giant, Oracle Corporation (NYSE:ORCL), has revealed that it is planning to raise between $45 billion and $50 billion in 2026 for the expansion of its cloud infrastructure capacity.
• Oracle stock is trading near recent lows. What should traders watch with ORCL?
What Happened: Following the announcement, Oracle’s stock saw a 2% rise in Monday morning trading. The funds, which will be raised through a combination of debt and equity, are targeted at meeting the contracted demand from Oracle’s cloud customers, including NVIDIA Corp (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), OpenAI, Advanced Micro Devices, Inc. (NASDAQ:AMD), TikTok and xAI.
Oracle’s debt insurance cost against default reached a five-year peak in December last year. Since its peak in September, Oracle's stock has plummeted 50% and fallen a further 11% following disappointing quarterly results in December, reports CNBC.
Oracle has secured $18 billion through a bond offering and finalized a $300 billion partnership with OpenAI.
The company faced a lawsuit in January from bondholders alleging losses due to the company’s concealment of its need to sell significant additional debt to expand its AI infrastructure.
According to the company statement, about half of the funding is expected to be raised through equity-linked and common equity issuances, including mandatory convertible preferred securities and an equity program of up to $20 billion. The remaining funds will be raised through unsecured bonds later this year.
As per the report by Reuters, Oracle’s AI infrastructure expansion has faced criticism from investors due to its rising debt and connections to OpenAI.
Why It Matters: The planned fundraising by Oracle signifies a major step in the company’s efforts to expand its cloud infrastructure and meet the growing demand from its customers.
However, the company’s increasing debt and the recent lawsuit raise concerns about the financial feasibility of the expansion plan.
The performance of Oracle’s stock in the coming months will be a key indicator of investor confidence in the company’s strategic direction.
ORCL Price Action: Oracle shares are up 0.091% at $164.72 at publication on Monday.
Photo: Rokas Tenys via Shutterstock
