W.002Oracle paid twice February’s spreads to finish its funding
On October 28 Oracle capped new money from the capital markets for fiscal 2027–30 at $20B. Five days later it sold all of it: $10B of stock at $116.00, 11.2% under the October 30 close, and $10B of bonds at 7.0–8.65%, at spreads 2.25 times February’s at the same maturities. Oracle says that completes the funding for its build; in June it had said it didn’t expect to issue more debt this calendar year. The cap doesn’t count the larger obligations: $288B of data-center leases signed but not yet started, up from $99.8B a year earlier, plus vendor financing and customer prepayments.
The same maturities cost 145–175bp more over Treasuries than in February
New-issue spreads over Treasuries, in basis points, for Oracle’s February 2, 2026 notes and the November 2 notes at the same maturities (the February 2036 bond against the new 2037). The figure over each pair is the change. In September 2025, Oracle’s 2045 bond priced at +115bp.
The notes
| Maturity | Size | Coupon | Yield | Spread | February coupon | February spread |
|---|---|---|---|---|---|---|
| 2029 | $2.00B | 7.000% | 7.062% | +240bp | 4.550% | +95bp |
| 2031 | $1.75B | 7.450% | 7.464% | +275bp | 4.950% | +115bp |
| 2033 | $2.25B | 7.850% | 7.851% | +305bp | 5.350% | +130bp |
| 2037 | $2.50B | 8.000% | 8.015% | +310bp | 5.700% | +145bp |
| 2046 | $1.50B | 8.650% | 8.667% | +335bp | 6.550% | +170bp |
| Weighted | $10.00B | 7.77% | +292.5bp | 5.39% | +130.1bp |
What Oracle promised, and what it sold
The amount matched the plan. Selling bonds this year didn’t. At its investor day on October 28, Oracle said it would limit additional money raised in the capital markets to $20B over fiscal 2027–30, $10B of equity and $10B of gross debt, refinancing excluded. Its CFO’s slides said the $20B “completes the funding” for the cycle, and she told analysts it was needed for the rest of fiscal 2027. With the $20B of stock Oracle sold at the market from June to August, that makes $40B for the fiscal year, the amount it gave in June. But in June Oracle also said it did “not expect to issue additional debt in calendar year 2026,” as it had said of bonds in February.
The stock went at a discount, after a round trip and more. Oracle rose 10.7% on investor day, to $144.54, then fell 17.5% to $119.22 by Monday’s close, about $77B of market value, and 8.7% below its close the day before investor day. The new shares priced at $116.00: 11.2% under the October 30 close, 2.7% under Monday’s, and about 18% under the roughly $141.84 the summer’s at-the-market sales averaged before commissions. They add 2.85% to the share count, which is 8.0% higher than at June 12. The stock rallied about 6% on Tuesday.
The bonds cost more in coupon and in spread. The $10B pays $777M a year in interest, 44% more than the same notes at February’s coupons. Treasury yields rose too, but the spreads did most of the work: on these maturities, Treasuries added about 75bp and spreads about 162bp of the 238bp rise in yield. The new spreads average 293bp, 2.25 times February’s at the same maturities, and the long end has gone from +115bp in September 2025 to +170bp in February and +335bp now.
Capex outran cash from operations in seven of the last eight quarters
Operating cash flow and capex by fiscal quarter, $B (years end May 31). The figure over each pair is free cash flow, operating cash flow less capex, $B.
Data
| Quarter | Operating cash flow | Capex | Free cash flow |
|---|---|---|---|
| Q1 FY25 | $7.43B | $2.30B | $5.12B |
| Q2 FY25 | $1.30B | $3.97B | −$2.67B |
| Q3 FY25 | $5.93B | $5.86B | $0.07B |
| Q4 FY25 | $6.16B | $9.08B | −$2.92B |
| Q1 FY26 | $8.14B | $8.50B | −$0.36B |
| Q2 FY26 | $2.07B | $12.03B | −$9.97B |
| Q3 FY26 | $7.15B | $18.64B | −$11.48B |
| Q4 FY26 | $14.62B | $16.49B | −$1.87B |
| Q1 FY27 | $23.10B | $28.50B | −$5.40B |
Is $20B enough? On BofA’s forecast, just; on consensus, no
Cash to May 31, 2028, the end of fiscal 2028, $B, on BofA’s free-cash-flow forecast. Oracle targets positive free cash flow in the second half of fiscal 2028 and $30B+ in fiscal 2029. Refinanced maturities, which the cap excludes, are left out, as are a minimum cash balance and the principal on vendor financing.
| Free-cash-flow forecast | FY27 after Q1, and FY28 | Cash left, May 2028 |
|---|---|---|
| BofA (FY27 −$30.4B, FY28 −$14.4B) | −$39.4B | $6.0B |
| FactSet consensus, as of Oct 28 (about −$35B in each year) | −$64.6B | −$19.2B |
S&P, which cut Oracle to BBB- in July, put its fiscal 2027 free-operating-cash-flow deficit near $42B. Evercore ISI estimated on October 27, the day before investor day, that Oracle might need another $50–60B for its build. Oracle’s answer is the money outside the cap: vendors financing hardware, customers bringing their own, and prepayments. Customer prepayments cut Q1’s capex by about 37% on Oracle’s net-cash-capex measure: $28.5B gross against about $18B net.
Signed leases nearly tripled in a year; borrowings rose 37%
$B at fiscal quarter ends: contracted backlog (remaining performance obligations), data-center leases signed but not yet started, and borrowings. Oracle doesn’t buy the buildings: the shells are leased, for 15–19 years, starting between now and fiscal 2029. On the balance sheet at August 31: $43.8B of lease liabilities for leases already started. Off it, besides the leases not yet started, are $34.2B of purchase obligations, mainly for cloud-infrastructure components and data-center power.
Data
| Quarter end | Contracted backlog | Leases signed, not started | Borrowings |
|---|---|---|---|
| Aug 2025 | $455.3B | $99.8B | $91.3B |
| Nov 2025 | $523.3B | $248.0B | $108.1B |
| May 2026 | $638.0B | $260.0B | $129.5B |
| Aug 2026 | $664.0B | $288.0B | $125.3B |
Leases not started at August 31, 2025 exclude another $6.6B signed after the quarter ended. The February 2026 figure isn’t in the filings we read, so that quarter is left out.
What the cap doesn’t count
Leases are the larger commitment. At August 31 Oracle had $288B of data-center leases signed but not yet started, against $125.3B of borrowings. A year earlier the leases were $99.8B. Developers finance the buildings themselves (Bloomberg reported an $18B bank loan for a New Mexico campus Oracle is to lease, and $38B for Vantage’s Texas and Wisconsin sites, in 2025), so most of that debt sits on other balance sheets; Oracle’s last annual report disclosed a guarantee of up to $3.3B of one lessor’s borrowing. The cap counts the equity and debt Oracle raises in the capital markets, refinancing excluded; it leaves out the leases, vendor financing and customer prepayments.
The backlog is what pays for it, slowly. Remaining performance obligations were $664B, about 90% of it cloud infrastructure, but only 13% is expected to be recognized as revenue in the next twelve months. Oracle targets at least $225B of revenue in fiscal 2030, from $67.4B in fiscal 2026.
Oracle is rated near the bottom of investment grade and priced below it. S&P rates it BBB-, one notch above junk; Moody’s has it at Baa2 with a negative outlook; Fitch affirmed BBB on Monday and said that after this raise it doesn’t expect Oracle to raise material incremental capital over the rating horizon. Five-year credit default swaps were about 296bp on November 2, and 331bp on October 21 against 80bp for Amazon and 56bp for Microsoft: levels S&P Global Market Intelligence says look more like a high-yield credit.
What this changes on 06.ai
- Pack 003 put Oracle’s fiscal 2026–30 need for debt or equity at $78.7B in its base case, with $67.9B raised. This deal takes the total to $87.9B, above the pack’s estimate; the pack’s need counts capex only, and Oracle pays about $6.5B a year in dividends. The pack’s fiscal 2028 gap of $25B now has to come from cash, vendors or customers, since Oracle says it won’t raise more in the capital markets beyond refinancing.
- Tracker lead: credit for the AI build’s borrowers, Oracle, CoreWeave and the neoclouds in packs 002 and 003: new-issue spreads, CDS and ratings, updated as deals price. Oracle’s long-end spread has nearly tripled in fourteen months.
Sources and method
| Item | Figure | Source |
|---|---|---|
| Investor day, Oct 28 | $20B limit on additional capital-markets funding for FY27–30, about $10B of equity and $10B of gross debt, excluding refinancing; on top of the $20B sold at the market; FY30 targets; free cash flow positive in the second half of FY28 and $30B+ in FY29; vendor financing, customer hardware and prepayments to cut upfront cash | Oracle |
| Investor day, CFO deck | “$20B Financing Completes the Funding for FY27-FY30 Investment Cycle”; gross debt flat after, as maturities are refinanced; data-center shells are leased | Oracle |
| The stock | Underwritten offering of $10B of common stock; shares outstanding at Aug 31; lock-up; use of proceeds | Prospectus supplement (424B5) |
| Stock pricing | $116.00 a share, 86,206,897 shares, about $9.9B net | TipRanks |
| The notes | Five tranches: sizes, coupons, prices, yields, Treasury benchmarks and spreads; expected ratings Baa2 (negative), BBB- (stable), BBB (stable) | Pricing term sheet (FWP), Nov 2 |
| February notes | Coupons and spreads of the February 2, 2026 notes at the same maturities | Pricing term sheet (FWP), Feb 2 |
| February plan | Oracle did not expect to issue more bonds in calendar 2026 | Oracle, Feb 1, 2026 |
| Q1 FY27 | Operating cash flow $23,103M, capex $28,499M; borrowings $125,337M; cash and securities; lease liabilities $43.8B; leases signed but not started $288B; purchase obligations $34.15B; RPO $664B, 13% in 12 months; ATM 141M shares for $19,909M | Oracle 10-Q |
| Earlier quarters | Operating cash flow, capex and borrowings, Q1 FY25–Q4 FY26, from the 10-Qs and year-end release tables; leases not started at Aug 31, 2025 ($99.8B) | Oracle 10-Q, Aug 31, 2025 |
| Leases not started | $248B at Nov 30, 2025 and $260B at May 31, 2026 | Hudson Labs |
| Prices | Closes: Oct 28 $144.54 (+10.73%), Oct 30 $130.67, Nov 2 $119.22 (−8.76%) | 24/7 Wall St., Nov 3 |
| Prices | Nov 2 close $119.22 | TradingKey |
| Forecasts | BofA free cash flow FY27 −$30.4B, FY28 −$14.4B | TheStreet |
| Forecasts | FactSet consensus free cash flow about −$35B in FY27 and similar in FY28, as of Oct 28 | CNBC, via Calcalist |
| Forecasts | Evercore ISI, Oct 27: Oracle might need another $50–60B for its build | TIKR |
| Forecasts | S&P: fiscal 2027 free-operating-cash-flow deficit near $42B (July 9) | PPC Land |
| Ratings | S&P cut Oracle to BBB- (stable) on July 9, 2026 | Newsquawk |
| Ratings | Moody’s affirmed Baa2, outlook negative, Nov 2 | Newsquawk |
| Ratings | Fitch affirmed BBB, outlook stable, and rated the new notes BBB, Nov 2 | Newsquawk |
| Credit | Five-year CDS about 331bp on Oct 21, against Amazon 80bp and Microsoft 56bp | FinanceFeeds |
| Credit | Five-year CDS about 296bp on Nov 2 (LSEG) | TradingKey |
| Credit | S&P Global Market Intelligence: Oracle’s CDS trade more like a high-yield credit; the stock rallied about 6% on Nov 3 | Yahoo Finance |
| Credit | Fitch: after this raise, no material incremental capital expected over the rating horizon | 24/7 Wall St., Nov 3 |
| Raises | September 2025 notes; the 2045s priced at +115bp | Pricing term sheet (FWP), Sep 24, 2025 |
| June plan | About $40B to raise in FY27, including the $20B at-the-market sale; no additional debt expected in calendar 2026; FY26 revenue $67.4B | Oracle, June 10, 2026 |
| Investor day | CFO Hilary Maxson: the $20B is needed for the rest of fiscal 2027 | Reuters, via KFGO, Oct 28 |
| Q1 FY27 call | Net cash capex after customer prepayments about $18B | MarketBeat, Sep 10 |
| Developers | About $18B bank loan for a New Mexico campus Oracle is to lease; $38B for Vantage’s Texas and Wisconsin sites (Bloomberg, Sep–Nov 2025) | Tiger Brokers |
| Developers | Oracle guaranteed up to $3.3B of one lessor’s borrowing (FY26 10-K) | Hudson Labs |
| 06.ai | Oracle’s FY26–30 external need, $78.7B on Street numbers, and the $67.9B raised by Q1 FY27 | Pack 003 |
Notes. Weighted averages use the new tranche sizes for both deals, so February’s figure is what the same $10B would have cost then: 5.39% and 130bp. Annual interest is size times coupon. The February 2036 note stands in for the new 2037.
Stock. Discounts are to the October 30 close named in the prospectus and to the November 2 close. Dilution divides the 86,206,897 new shares by the 3,023,726,695 outstanding at August 31; the change since June uses the 2,880,471,000 at June 12. The at-the-market average is the $20B program over its 141M shares, before commissions ($19,909M net, $141.20 a share).
Free cash flow is operating cash flow less capex, Oracle’s definition; quarters not reported on their own are year-to-date figures less the prior quarter’s. The cash bridge starts from cash, equivalents and marketable securities at August 31 ($37.1B), adds about $19.8B of net proceeds, takes off seven quarters of dividends ($0.50 a common share on the new share count, plus the preferred: $11.5B) and the forecast’s free cash flow for fiscal 2027 less Q1’s actual −$5.4B, plus fiscal 2028.
Wire reports are written within hours of the news, on a six-hour schedule. Each lists its sources and shows the arithmetic behind its figures. Not investment advice.