Oracle shares rise 12% after new cash flow forecast for AI spending

In short: Oracle’s share price rose 12% after it told investors it expects strong cash generation from its AI-related data centre plans sooner than expected.

What happened

Oracle said on Wednesday that it expects to generate $30bn in “free cash flow” by the end of its 2029 fiscal year. Free cash flow is the money left after paying for day-to-day costs and big investments, like building facilities.

The forecast came at Oracle’s annual investor day in Las Vegas. The company’s chief financial officer, Hilary Maxson, said Oracle expects its spending on new projects to peak by 2028. She also said the company expects growth to be “self-funded” starting in 2029, meaning it hopes to pay for expansion using money the business brings in.

Oracle also said it plans to limit additional fundraising for its data centre strategy to $20bn through its 2030 fiscal year. It expects to split that evenly between debt and equity, which means borrowing money and selling shares.

The company is trying to shift from mainly selling business software to running large data centres, which are like giant warehouses full of computers that provide computing power to other companies. Oracle wants to compete more directly with Amazon and Google, and it has been pitching its services to AI customers such as OpenAI.

Oracle has faced delays on some projects, including issues tied to permits, construction, and getting enough electrical power. Its credit rating is one step above “junk,” which is a warning sign that lenders see higher risk.

Why it matters

Building AI data centres is expensive, and investors want to know when that spending will start turning into reliable profits. Oracle’s new targets aim to reassure the market that it can scale up without taking on unlimited debt.

Source: Financial Times