Oracle (ORCL) , the multi-billion-dollar cloud applications and platform service provider, is again in the news, for negative cash flow and a new $15 billion bond sale to fund its AI ambitions.
- In January, Oracle, OpenAI and Softbank announced a $500 billion Stargate project to boost U.S. AI infrastructure.
- To help fulfil the terms, Oracle intends to raise $15 billion through a corporate bond sale.
- The company is also discussing a potential $20 billion cloud computing agreement with Meta Platforms.
In its fiscal year Q1 2026 report, Oracle missed the mark on GAAP EPS, down 2%. The company’s free cash flow also showed a 152% decline year over year, amounting to -$5.9 billion.
The drop reflects increasing capital expenditures, which surged to $27.4 billion in Q1 2026, an immense increase from the $7.8 billion spent in the prior year.
Oracle Annual Report
Despite this, Oracle’s $455 billion remaining performance obligations (RPOs), which are future contracted revenue, bolstered investor confidence.
Oracle’s stock soared 35.5% on Sept. 10, briefly making CTO Larry Ellison the world’s richest man, taking over Elon Musk.
Financial concerns rise to fund AI infrastructures
On Sept. 24, Bloomberg reported that Oracle plans to raise $15 billion by selling corporate bonds in seven parts, including a 40-year bond, expected to yield 1.65% more than what investors get from similar US treasuries.
More Tech Stocks:
- Is Oklo a high-risk, high-reward investment?
- Nvidia’s deal with OpenAI ‘looks a lot like financial theater’
- Quantum computing companies looking to finance the future
Shares slipped 1.7% on the news, underlining investor uncertainty over rising financial risks.
The debt sale comes as OpenAI prepares for its role in the Stargate project, which it entered with Oracle and SoftBank in January.
Related: Moody’s stuns with urgent call on Oracle’s future
In January, OpenAI announced a $500 billion investment at the White House to “secure American leadership in AI,” and “create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world.”
Oracle boasted $11 billion in cash and equivalents and had $9 billion of debt due within a year. Its long-term debt totals $82.2 billion. Its current ratio, a measure of its ability to cover short-term debt with short-term cash, is 0.62. Typically, investors like to see a ratio greater than one.
Expanding AI demand and partnerships
Oracle is also negotiating a $20 billion cloud computing agreement with Meta, and it also stands to gain as it prepares to become TikTok’s security provider for American Operations.
Meanwhile, OpenAI announced yesterday that it is expanding its AI infrastructure by adding five new US sites under the Stargate project.
In the official release, Clay Magouyrk, CEO of Oracle, said,
Oracle’s reliable, scalable and secure AI infrastructure is helping OpenAI rapidly scale its business. To meet this enormous demand, we continue to expand OCI’s footprint at an unrivaled pace to deliver the most performant and cost-effective AI training and inference.
Related: Investors write off Oracle earnings miss as management promises stratospheric growth
Oracle has already utilized most of its cash flow in the past year and invested heavily in cloud and AI infrastructure.
However, analysts and investors are betting on the promise of future revenue from large contracts to build large-scale GPU clusters for tech giant customers like Meta, OpenAI, and xAI.
Recently, Morgan Stanley raised the firm’s price target to $320 from $246, keeping an Equal Weight rating on the shares.
A change in leadership is also reshaping the company. It announced that co-CEOs Clay Magouyrk and Mike Sicilia replaced CEO Safra Catz, who will now serve as executive vice-chair of the board.
Key Takeaways
- Oracle is spending heavily on AI-driven cloud infrastructure, entering negative cash flow territory.
- Investor sentiment remains strong, though stocks slipped after news of selling debt to raise cash.
- The Stargate Project with OpenAI is expanding, and five new sites have been announced.
Related: T-Mobile CEO sends Apple iPhone message
#Oracle #slips #reports #unexpected #debt #plan