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Oracle announced that peak investment in AI data centers will come this year and next. Free cash flow could turn positive to US$30 billion in 2029, and this would limit additional financing to US$20 billion, leading to a simultaneous rise in stocks and bonds.
Oracle On the 28th, it was announced that the company’s AI construction spending will reach its peak in this and the next two fiscal years. Free cash flow is expected to reach US$30 billion in the 2029 fiscal year, and it has pledged to raise no more than US$20 billion in additional financing by the 2030 fiscal year. Market skepticism about huge AI investments and debt financing subsided slightly and the share price closed up 11%.deeply concerned Also rose.
Oracle Chief Financial Officer Hillary Maxon said at the annual investor day in Las Vegas that free cash flow is expected to be positive in the second half of fiscal 2028 and reach $30 billion in fiscal 2029, which is better than the market’s original expectation that it would still be negative. Oracle’s fiscal year ends at the end of May each year.
Oracle said capital spending will peak in the current and next fiscal years, i.e., 2027 and 2028 fiscal years, and is expected to decline in the 2029 fiscal year. By then, the funds required for development will be self-supported and will no longer have to depend on external financing.
Oracle, originally famous for its database software, is now turning into a provider of AI computing power.OpenAI Customers are being waited upon to build large-scale data centers. The huge construction expenditure focuses the market’s attention to examine whether AI investments can pay back. In fiscal 2026, ending in May this year, Oracle’s free cash flow was negative US$23.7 billion, making it the first major technology company to experience negative free cash flow due to data center investments.
Markson said an additional 7GW of data center capacity will be delivered over the next few years, bringing total capacity to more than 10GW by the end of fiscal 2028. 1GW of electricity can be used by about 750,000 US homes at the same time.
Bloomberg Intelligence analyst Anurag Rana believes this spending plan and outlook could ease market concerns that capex will remain high after the next two years.
Oracle has promised that the additional financing needed to support this wave of AI creation will be limited to US$20 billion from now through the 2030 fiscal year, divided equally between issuing stock and raising debt.
“We have announced that $20 billion will be split 50-50 between debt and equity, and this is the final amount needed to finance the remaining round of construction,” Markson said.
Oracle stated that supplier financing, customer provision of hardware, and customer upfront payments will reduce the upfront capital required before becoming free cash flow positive.
The company had this year said it would raise US$40 billion through equity and debt in the current financial year, of which equity issuance of US$20 billion has been completed in the first quarter. As of August 31, notes payable and other borrowings totaled approximately US$125.34 billion, and cash and cash equivalents totaled approximately US$36.37 billion.
Oracle estimates net debt in fiscal 2029 will fall to less than 3.5 times full-year adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA). The company’s current credit rating is just one notch above non-investment grade, and S&P only downgraded it in July.
The collaboration with OpenAI has added hundreds of billions of dollars to Oracle’s cloud business backlog, but to fulfill these contracts, it must first invest heavily to build data centers, forcing the company to rely on debt and stock sales.
