Oracle’s $45–50B Debt and Equity Plan Sends CDS 17% Lower
Oracle’s five-year CDS dropped 17% after it unveiled plans to raise $45 billion to $50 billion via debt and equity to fund its AI cloud infrastructure buildout. Barclays upgraded Oracle’s debt to overweight, projecting further CDS compression, while at-the-market equity sales could dilute up to 10% of trading volume.
1. Massive Fundraising to Expand Cloud Infrastructure
Oracle has announced plans to raise between $45 billion and $50 billion through a combination of debt and equity issuances in calendar 2026. The proceeds will finance the build-out of additional cloud data centers and AI compute capacity to fulfill contracted demand from marquee customers such as Nvidia, Meta, OpenAI, AMD, TikTok and xAI. Roughly half of the funding is expected to come from unsecured bond issuances, while the remainder will be sourced via equity-linked instruments and at-the-market stock programs, including mandatory convertible preferred securities. This balanced approach is designed to preserve the company’s investment-grade credit rating and mitigate leverage risks as it accelerates capital expenditures.
2. Credit Default Swaps Plummet on Improved Financing Outlook
Oracle’s 5-year credit default swap (CDS) spread fell by 17% following the fundraising announcement, marking the sharpest decline in over a year. Barclays analyst Andrew Keches upgraded Oracle’s debt to overweight, noting that the inclusion of equity financing ‘significantly inhibits the downside for credit’ and should drive further compression of CDS levels. The move alleviates bondholder fears that massive AI infrastructure commitments would overstrain the balance sheet and trigger a downgrade from the current BBB rating. Late last year, CDS spreads had surged to multi-year highs amid concerns over an $18 billion bond sale and the company’s growing backlog of data center obligations.
3. Skyrocketing Backlog Heightens Stakes for Execution
Oracle’s remaining performance obligations have surged to approximately $523 billion, driven largely by multiyear contracts with AI-focused clients. This backlog represents more than eight times the company’s current annual revenue run rate and underscores the critical need to bring new capacity online swiftly. While the visibility is positive for future revenue growth—cloud revenue was up over 30% in the prior quarter—the front-loaded capital commitments carry execution risk. Unused capacity, supply-chain delays or cooler demand could amplify leverage pressures and potentially erode margins if revenue recognition lags the pace of spending.