Oracle Seeks to Reassure Investors Over AI Spending

Oracle shares surged more than 12% on Wednesday after the company outlined a path toward stronger cash generation and limits on additional financing for artificial intelligence infrastructure. The announcement came as investors increasingly scrutinize the cost of building data centers and the debt needed to support the AI boom.

Speaking at Oracle’s investor day in Las Vegas, Chief Financial Officer Hilary Maxson said capital expenditure is expected to peak in the current fiscal year and the following year. The company also pledged to limit additional AI-related financing to $20 billion through fiscal 2030.

The forecast is intended to demonstrate that Oracle’s large infrastructure commitments can be supported by growing revenue and improving cash flow, rather than an ongoing increase in external funding.

Free Cash Flow Expected to Turn Positive

Oracle expects free cash flow to become positive in the second half of fiscal 2028 and exceed $30 billion in fiscal 2029, when capital spending is projected to decline.

The company also expects to stop relying on outside financing for growth from fiscal 2029. By that year, Oracle forecasts that net debt will fall below 3.5 times annual core earnings.

These projections represent an important test of Oracle’s investment strategy. Although its expanding cloud backlog reflects strong demand, the company must continue building the data centers and computing infrastructure required to fulfill its commitments.

OpenAI Partnership Raises Both Opportunity and Risk

Oracle’s partnership with OpenAI has added hundreds of billions of dollars to its cloud backlog. However, fulfilling those contracts requires substantial investment in data centers and related infrastructure, increasing the company’s dependence on borrowing and equity issuance.

Oracle faces particular scrutiny because it has a smaller revenue base than cloud leaders such as Microsoft and Amazon and relies heavily on OpenAI, which the report describes as loss-making.

To manage upfront funding requirements, Oracle plans to use vendor financing, customer-provided hardware and customer prepayments. These arrangements are expected to reduce immediate cash requirements while the company works toward positive free cash flow.

Debt and Equity Financing Remain Under Scrutiny

Oracle previously said it would raise $40 billion through debt and equity during its current fiscal year, including a $20 billion stock sale completed in the first quarter. Maxson said the additional funding required for the remainder of fiscal 2027 would be capped at $20 billion, split evenly between debt and equity.

As of August 31, Oracle reported $125.34 billion in notes payable and other borrowings, alongside approximately $36.37 billion in cash and cash equivalents.

The company’s five-year credit default swaps, which measure the cost of insuring against a debt default, edged lower to 287.2 basis points on Wednesday. The announcement also lifted shares of AI infrastructure companies CoreWeave, Nebius, Applied Digital and Iren, which gained between 2.1% and 5%.

What Investors Should Watch Next

Oracle reaffirmed its fiscal 2027 forecast for revenue above $90 billion and adjusted earnings of $8.10 per share. For fiscal 2030, it projected revenue exceeding $225 billion, an adjusted operating margin above 40% and adjusted earnings above $21 per share.

Investors will be watching whether Oracle can meet these targets while bringing capital expenditure under control and improving cash generation. The credibility of its financing limits, the pace of data center construction and its ability to convert contracted demand into revenue will be central to assessing the sustainability of its AI expansion.