Oracle looks to raise up to $50B as debt concerns grow

After Wall Street's growing concern about Oracle's (ORCL) debt-fueled AI data center expansion strategy led to a dramatic 50% plunge from its September peak, the company is laying out a plan to raise more money.

Oracle on Sunday issued an equity and debt financing plan for the calendar year 2026 in which it is looking to raise between $45 and $50 billion through equity and debt. About $20 billion will be raised through equity and equity-related instruments.

The company said in its earnings in December that its capex is expected to reach $50 billion for the fiscal year ending in May 2026, which is $15 billion higher than it had projected in September. This means that it is planning to pay for all of it through its equity and debt plan.

It said that it is raising the money "in order to build additional capacity to meet the contracted demand from our largest Oracle Cloud Infrastructure customers," which includes OpenAI, AMD (AMD), Meta Platforms (META), Nvidia (NVDA), TikTok and xAI.

Jacob Bourne, an analyst at Emarketer, told Bloomberg in December that Oracle is facing “mounting scrutiny over a debt-fueled data center build-out and concentration risk amid questions over the outcome of AI spending uncertainty.”

When Oracle announced a $300-billion deal with OpenAI last year, it had initially sent its stock soaring and briefly made founder Larry Ellison the richest man in the world.

But that deal is in some ways coming back to haunt the company as OpenAI is facing its own scrutiny after CEO Sam Altman said the company plans to spend roughly $1.4 trillion over the next eight years with no clear path to generating the kind of revenue to make up for that kind of massive expenditure.

In other words, if OpenAI can't find a way to monetize its business, that could leave Oracle with a major customer who may not be able to pay for its data center capacity.

Oracle could be eyeing massive layoffs

The release of its equity and debt financing plan comes on the heels of a data center themed analyst letter from TD Cowen indicating that Oracle may end up laying off between 20,000 to 30,000 employees in order to help address its capital pressures. According to TD Cowen, this reduction in headcount would drive $8-$10 billion in incremental free cash flow.

And the combination of Oracle's massive capex needs along with questions about OpenAI's ability to fund its trillion-dollar spending plan in the coming years, "has led to multiple US banks to pull back from lending to Oracle-linked data center projects," according to TD Cowen.

"Furthermore, our channel checks indicate that multiple Oracle data center leases that were under negotiation with private operators struggled to secure financing, in turn preventing Oracle from securing the data center capacity via a lease," the bank added.

TD Cowen said that in an effort to ease its debt load, the company could also seek to sell off assets, including health tech unit Oracle Health, which was previously known as Cerner before Oracle acquired it in 2022 for $28.3 billion. The analysts did not estimate how much much funding this divestment could net Oracle.

Oracle's stock has dropped nearly 18% to start the year.

Guggenheim analysts, who called Oracle its "Best Idea Into 2026," were bullish about the company's fundraising plans, saying in a client note on Monday that Oracle is "not only saying they're committed to Investment Grade debt, but they are sending a clear message today to bond investors and rating agencies that they are."

"We expect this to be well-received by the rating agencies and bond investors, who have had an outsized influence on the stock of late," Guggenheim analyst John DiFucci wrote.

He noted that there was an opportunity for investors with a longer time horizon - "a few years rather than a few weeks or months" - to build a position in Oracle's shares now that it has slumped so much from its highs.

"We believe investors will appreciate the clarity provided on timing and magnitude of this upcoming debt raise, and it's also encouraging that Oracle is already calling it investment-grade debt, given they've likely been in close communication with the debt rating agencies as of late," DiFucci added.