Oracle's $10B Stock Sale at $116: Time to Buy?

Oracle (ORCL) made a big move on Nov. 2, selling 86.2 million new shares at $116 each to raise about $9.9 billion. That's part of a larger $20 billion capital raise announced at its Oct. 28 investor day, which also included $10 billion in new debt. The stock sale priced 11% below the $130.67 close on Oct. 30, the last trading day before the deal, and well below the $144.54 close on investor day itself.

The company sold more shares than initially expected because the deal was capped in dollars, not shares. At $116 per share, $10 billion bought about 86 million shares, roughly 25% more than the 69 million that would have been sold at $145. The new shares increase Oracle's share count by about 3%, from 3.02 billion to 3.11 billion.

The debt portion consists of $10 billion in notes across five issues maturing from 2029 to 2046, with interest rates between 7% and 8.65%. That adds about $780 million in annual interest expense, on top of an already rising interest bill. Oracle's interest expense grew 55% year over year in fiscal Q1, reaching $1.4 billion for the quarter.

The timing is notable: Oracle spent $28.5 billion on capital expenditures in fiscal Q1 alone, more than triple the prior year, as it expands its cloud infrastructure for AI workloads. The entire $20 billion raise covers only about 70% of that one quarter's spending. However, by completing the full raise now, Oracle has committed to not returning to the capital markets for new stock or debt through fiscal 2030, which should ease investor concerns about further dilution.

The $116 price is significant because it's near Oracle's lowest close in the past year and represents a valuation of just 10 times expected adjusted earnings per share for fiscal 2028. For a company growing revenue at roughly 30%, that's a relatively low multiple, suggesting the market is pricing in significant risks.

Those risks are real: Oracle's borrowings were already about $125 billion before the new notes, and capital spending is expected to peak this fiscal year and next. Free cash flow isn't expected to turn positive until the second half of fiscal 2028. If AI customer demand weakens before then, the debt burden could become a much bigger problem than the 3% dilution from the stock sale.

On the positive side, Oracle's operating cash flow hit a record $23 billion in fiscal Q1, up 184% year over year, and remaining performance obligations (contracted revenue not yet recognized) reached $664 billion. Management expects revenue growth of 30% to 34% in the current quarter. The company's cloud infrastructure business is clearly in high-growth mode.

The stock sale also removes a near-term overhang. Oracle had already sold $20 billion in stock through an at-the-market program in fiscal Q1, so investors were worried about further dilution. By completing the full $20 billion raise now, Oracle has effectively capped its capital markets activity through fiscal 2030, which provides clarity.

At $116, the stock is pricing in a lot of bad news. The question is whether the growth story can overcome the balance sheet concerns. For long-term investors willing to stomach volatility, the risk/reward looks favorable, but the debt load and cash flow timeline mean it's not a slam dunk.