Market reaction
Oracle (NYSE:ORCL) shares rose about 3% on Monday morning, recovering from an earlier roughly 5% decline that followed the company's announcement of plans to raise substantial capital this year. Investor concerns about increased financial leverage eased after Fitch Ratings reconfirmed Oracle's credit profile and assigned a rating to the company's proposed benchmark bond issuance.
Credit action and ratings
Fitch assigned the proposed benchmark size unsecured bonds a 'BBB' rating. The agency also maintained Oracle's Long-Term Issuer Default Rating at 'BBB' and its Short-Term Issuer Default Rating at 'F2', and retained a Stable outlook on the issuer ratings.
Purpose of the capital raise
Oracle said it intends to raise between $45 billion and $50 billion through a mix of debt and equity this year. Proceeds from the bond offering are intended for general corporate purposes, which the company specified to include capital expenditures, repayment of debt and potential acquisitions.
Link to AI investments and commercial contracts
The planned fundraising is closely linked to elevated capital spending on artificial intelligence compute infrastructure. Those investments are supporting multi-year commercial contracts Oracle has with AI participants including OpenAI, xAI, Meta (NASDAQ:META) and Nvidia (NASDAQ:NVDA).
Fitch's financial projections
Fitch expects Oracle's EBITDA leverage to exceed 3.5x in fiscal 2026, with a projected decline in fiscal 2027-2028 as revenues and EBITDA from the AI compute investments ramp up. The rating agency also forecasts negative pre-dividend free cash flow, estimating it will exceed $26 billion in fiscal 2026 and $18 billion in fiscal 2027.
Liquidity and revenue profile
As of the second quarter of fiscal 2026, Oracle reported approximately $20 billion in cash, cash equivalents and marketable securities. During that same period, roughly 80% of the company's revenue came from recurring sources.
Conclusion
The Fitch action provided a degree of reassurance to markets by preserving Oracle's issuer ratings and by assigning a 'BBB' grade to the proposed benchmark bonds, even as the company moves forward with a large capital raise tied to AI-focused capital expenditure. Fitch's near-term projections, however, underscore higher leverage and substantial negative pre-dividend free cash flow in fiscal 2026 and 2027 before anticipated improvement in later years.