Oracle CEOs Clay Magouyrk and Mike Sicilia sit down with CNBC’s David Faber on Oct. 13, 2025.
CNBC
It’s been a rollercoaster year for Oracle investors, as they try to assess the strength of the software giant’s position in the artificial intelligence boom.
The stock is up more than 30% for the year even after a 23% plunge in October, which was its worst month since 2001. It’s recovered a bit in November, climbing almost 10% for the month as of Tuesday.
Heading into the company’s fiscal second-quarter earnings report on Wednesday, pressure is building on management — and newly installed CEOs Clay Magouyrk and Mike Sicilia — to show that Oracle can continue to finance the company’s aggressive infrastructure plans while simultaneously convincing Wall Street that the AI-fueled hypergrowth story remains intact.
In recent months, Oracle has emerged as a more central player in AI, largely due to a $300 billion deal with OpenAI, which came to light in September, an agreement that involves the AI startup buying computing power over about five years, starting in 2027.
Funding Oracle’s compute buildout is going to require mounds of debt. In late September, Oracle raised $18 billion in a jumbo bond sale, one of the largest debt issuances on record in the tech industry, and the company is now the biggest issuer of investment grade debt among non-financial firms, according to Citi.
“There is something inherently uncomfortable as a credit investor about the transformation of the sort we’re facing that is going to require an enormous amount of capital,” Daniel Sorid, head of U.S. investment grade credit strategy at Citi, said on a video call to investors on Friday, a replay of which was provided to reporters.
Oracle has secured billions of dollars of construction loans through a consortium of banks tied to data centers in New Mexico and Wisconsin. Citi analyst Tyler Radke estimates Oracle will raise roughly $20 billion to $30 billion in debt every year for the next three years.
As of August, the company’s combined short-term and long-term debt, which includes lease obligations, sat at $111.6 billion, up from $84.5 billion a year earlier, according to FactSet, while cash and equivalents slipped over that stretch to $10.45 billion from $10.6 billion.
As Oracle aims to build out sufficient capacity to meet the rising demand its seeing from customers like OpenAI, the street is questioning whether company will tap sources other than the debt market.
“Oracle will be looking at all options out there — off-balance sheet facilities, raising debt, issuing equity or perhaps exploring interest from a foreign investor, i.e. a sovereign wealth fund,” said Rishi Jaluria, a software analyst at RBC Capital Markets, in an interview. Jaluria recommends holding the stock.
A credit investor who spoke to CNBC highlighted Meta’s $27 billion deal with Blue Owl Capital, a joint venture between the two entities, as one type of financing arrangement being used for AI data center development.
The market is also debating whether Oracle can use vendor financing options to reduce the amount of upfront capital required to stand up data centers, including securing favorable financing terms with suppliers like Nvidia, a credit investor told CNBC. However in that scenario, Nvidia’s chips would be used as collateral, raisings concerns around GPU depreciation.
An Oracle spokesperson declined to comment.
Growing skepticism
The discomfort that Sorid referenced has driven Oracle’s 5-year credit default swaps to new multi-year highs. Credit default swaps are like insurance for investors, with buyers paying for protection in case the borrower can’t repay its debt. Bond investors told CNBC that they’ve become a popular way to hedge the risk tied to the AI trade.
Credit analysts at Barclays and Morgan Stanley are recommending clients buy Oracle’s 5-year CDS. Andrew Keches, an analyst at Barclays, told analysts in a note last month that he didn’t see an avenue for Oracle’s credit trajectory to improve. And in late November, Morgan Stanley analysts said Oracle’s CDS had attracted not just typical credit investors but “tourists” who have less experience with this type of financial instrument.
Spools of electrical wires outside a series of assembly tents during a media tour of the Stargate AI data center in Abilene, Texas, US, on Tuesday, Sept. 23, 2025. Stargate is a collaboration of OpenAI, Oracle and SoftBank, with promotional support from President Donald Trump, to build data centers and other infrastructure for artificial intelligence throughout the US.
Kyle Grillot | Bloomberg | Getty Images
Oracle’s revenue growth and backlog of business will be closely monitored as investors try to gauge whether the company’s spending plans are justified. Analysts expect to see revenue growth in the latest quarter of 15% to $16.2 billion, according to StreetAccount.
Remaining performance obligations, a measure of contracted revenue that hasn’t yet been recognized, are expected to surpass $500 billion, StreetAccount says, which would mark a more than fivefold increase from a year earlier. Oracle’s disclosure in September that RPOs jumped 359% to $455 billion sent the company’s stock up 36%, its best single-day performance since 1992.
Since then, the stock has wiped out all of those gains and then some.
Gil Luria, an analyst at D.A. Davidson, said that beyond infrastructure, he’ll be closely watching Oracle’s core database business, which is a source of much higher margins. That will help determine how much flexibility the company has in going to the capital markets, he said.
“Oracle can handle the debt load,” said Luria, who recommends holding the stock. “But they need more cash flow to raise more capital from here.”
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