As Oracle makes a ‘will not do’ pledge to worried investors; analysts say company is trying to show that there’s a method to the madness in ..
Last month, Oracle told its investors that it will not raise more than $20 billion in additional financing for AI through fiscal 2030. Speaking at the company’s investor day in Las Vegas, CFO Hilary Maxson said Oracle also expects free cash flow to turn positive in the second half of fiscal 2028. It is expected to top $30 billion in fiscal 2029, as the capital spending declines.
The pledge is meant to reassure worried investors that the company led by Larry Ellison will need ever-larger sums of outside money to fund its aggressive data-center buildout, according to a Reuters report then. Following the announcement, Emarketer analyst Jacob Bourne, as quoted in Reuters report, said: “Oracle is trying to show investors that there’s a method to the madness of its massive AI infrastructure spending”.
The company also expects to stop depending on external funding for its growth from fiscal 2029. It also forecasts that its net debt will fall to less than 3.5 times its annual core earnings that year.
In October, Oracle said it plans to reduce its initial spending by using vendor financing, hardware provided by customers and advance payments from customers. These steps are expected to help the company manage its cash needs until it starts generating positive free cash flow.
Earlier this year, Oracle said it planned to raise $40 billion through debt and stock sales during the current financial year. This included a $20 billion stock sale that it completed in the first quarter. As of August 31, Oracle had $125.34 billion in debt and other borrowings, while its cash and cash equivalents stood at around $36.37 billion.
Because it does not have the large and steady revenue streams of cloud giants such as Microsoft and Amazon, as stated in the report, Oracle has become a major concern in the AI industry. It also depends heavily on OpenAI , the ChatGPT maker that is still losing money. The deal with OpenAI has added hundreds of billions of dollars in future cloud business to Oracle’s order book. However, building the data centres and other infrastructure needed to meet these commitments has pushed Oracle to rely heavily on borrowing money and selling shares.