Oracle rallies after telling investors its AI bet will pay off sooner than expected

Oracle stock jumped 12 per cent on Wednesday as it gave investors new long-term forecasts with better than expected free cash flow and moderate borrowing, in a bid to calm market jitters about its massive bet on AI.

Larry Ellison’s database group said it expected $30bn in free cash flow by the end of its 2029 fiscal year, according to Oracle chief financial officer Hilary Maxson. Investors had anticipated that the company would remain free cash flow negative until the following year, according to S&P Visible Alpha.

Maxson told an annual investor day in Las Vegas that the company expected capital expenditure to peak by 2028 and that its growth would be “self-funded” starting in 2029.

Oracle plans to limit additional fundraising to support its AI strategy to $20bn, evenly split between debt and equity, between now and its 2030 fiscal year, Maxson added.

Its bonds also rallied on Wednesday, with 30-year notes trading for about 83 cents on the dollar, up from a low of 79 cents in mid-October, according to Bloomberg data.

Oracle has been under significant pressure to prove the returns of its huge AI bet as it attempts to pivot from business software to data centres that can compete with Amazon and Google in selling computing power to the likes of OpenAI. Its shares are down around 25 per cent since the start of the year.

Several projects for Oracle have been beset with permitting and construction delays. In September it sent Blue Owl subsidiary Stack Infrastructure — the developer of a 1,400-acre campus in Doña Ana County, New Mexico — a force majeure notice, in a bid to put off payments should the project get derailed or fail to come online in 2028 as planned.

Oracle has faced delays accessing power at a site in Wisconsin and has experienced pushback from the local community around a project in Michigan.

Its corporate credit rating sits one notch above junk following a downgrade from S&P in July. Oracle raised $25bn in a bond offering earlier this year, while it issued $20bn in new shares in the quarter ending August 31.

Maxson also told investors that the company expected to deliver seven gigawatts of data centre capacity to customers in the “next couple of years”.

Additional reporting by Michelle Chan in New York