Oracle stock pops 12% as long-term revenue forecast and clarity on financing ease debt concerns - CNBC
Oracle shares jumped 11% on Wednesday after the software company issued a revenue forecast of $225 billion for fiscal 2030, implying 35% average annual growth, and said it will limit additional fundraising over that stretch to $20 billion.
At its investor day, Oracle said that, as part of its financing plan for fiscal 2027 through 2030, the amount raised will be divided equally between equity and debt.
"Vendor financing, customer-provided hardware and customer prepayments are expected to reduce upfront cash requirements through the transition to positive free cash flow," Oracle said in a filing with the Securities and Exchange Commission.
Analysts polled by LSEG expected revenue growth of 8% in fiscal 2027, followed by significant acceleration over the next two years. They're projecting revenue in fiscal 2030 of $224.2 billion.
Prior to Wednesday, Oracle had lost about one-third of its value this year on concern that rising interest rates and the company's hefty debt load will make its artificial intelligence buildout too costly. Oracle has issued $117 billion in long-term debt and is clinging to an investment-grade credit rating of BBB-, the lowest level of investment grade above junk, according to S&P.
Long known as a giant in enterprise software, Oracle jumped into the AI infrastructure game in a major way last year to try and compete with the hyperscalers like Google and Amazon while providing capacity to OpenAI. Its capital expenditures more than doubled to $55.7 billion in fiscal 2026, and are expected to jump another 65% this fiscal year to $91.9 billion, according to FactSet.
Oracle needs revenue expansion from its buildout to cover the soaring costs. The company said its operating margin in fiscal 2030 will top 40%.
Oracle also said it will turn free cash flow positive in the second half of fiscal 2028 and reach more than $30 billion in free cash flow the following year. Analysts expect negative free cash flow of $35 billion this fiscal year and a similar number next year, according to FactSet.
The spread on Oracle's five-year credit default swaps, which are insurance against default, currently sits at 277 basis points after reaching about 320 basis points earlier this month. It's up almost 100% this year.
—CNBC's Michelle Fox and Jordan Novet contributed to this report.
