Oracle Just Sold $10 Billion of Stock at $116 a Share. Is the Stock a Buy at That Price?

Oracle (ORCL +0.82%) set a cap at its investor day on Oct. 28. Through fiscal 2030, it would raise up to $20 billion of new money in the stock and bond markets, which it expected to split equally between shares and debt. Five days later, on Nov. 2, it raised it all.

The cloud giant sold 86.2 million new shares at $116 each, netting around $9.9 billion. A separate $10 billion of notes, in five issues maturing from 2029 to 2046, carries interest rates between 7% and 8.65%. Both deals closed on Nov. 4.

As I write, the stock trades around $116 — about where the new shareholders bought in, and near its lowest close in the past year. And I’d say the price Oracle got matters more than the size of the deal.

Image source: Getty Images.

Oracle sold more shares than I figured

Oracle sold the stock about 11% below the $130.67 it closed at on Oct. 30, the last trading day before the deal. Shares had closed at $144.54 on investor day itself.

This gap matters because the limit was set in dollars, not shares. When I covered the cap last week, I figured $10 billion of stock at around $145 a share would mean about 69 million new shares. At $116, the same $10 billion took about 86 million — about a quarter more.

Still, using the full limit at once has an upside. Oracle’s promise spans its fiscal 2027-to-2030 investment cycle (its fiscal years end May 31), and only refinancing of existing debt sits outside it. By its own commitment, then, Oracle shouldn’t have to sell more stock or new debt in the capital markets through fiscal 2030.

This should ease worries about further share sales, which Oracle relied on heavily this year. It sold $20 billion in stock using an at-the-market program in its fiscal first quarter of 2027 (which ended Aug. 31, 2026) alone.

The notes are the pricier half

As for the dilution, the stock sale boosts Oracle’s share count by about 3%, from the 3.02 billion outstanding at the end of August to about 3.11 billion. Future profits now get spread across that many more shares.

But in cash terms, the new stock is cheap to carry. At Oracle’s $0.50 quarterly dividend, the 86.2 million new shares add around $172 million a year in payouts.

The notes cost far more. Across the five issues, the $10 billion carries about $780 million in interest per year. And that adds to an interest bill that was already rising fast.

Oracle’s interest expense grew 29% year over year in fiscal 2026, reaching $4.6 billion. Growth then sped up to 47% in the fiscal fourth quarter and 55% in fiscal Q1, when interest expense hit $1.4 billion for the three months. Put simply, the new notes add over half a recent quarter’s interest bill a year.

Less than a quarter’s spending

And the $20 billion doesn’t go far at Oracle’s current spending rate. The company spent $28.5 billion on capital expenditures in fiscal Q1, more than triple the $8.5 billion it spent a year earlier, as it expanded its cloud infrastructure business. The whole raise covers around 70% of that one quarter.

The rest needs to come from the business, which is growing fast. Oracle’s operating cash flow hit a record $23 billion in fiscal Q1, up 184% year over year. Contracted revenue it hasn’t recognized yet, called remaining performance obligations, reached $664 billion at the end of August. And management expects revenue to rise somewhere between 30% and 34% year over year in the fiscal second quarter.

But capital spending topped operating cash flow by around $5 billion in fiscal Q1. Oracle doesn’t expect to have positive free cash flow until the second half of fiscal 2028.

ORCL – Oracle

$116.10+$0.94 (+0.82%)

NYSE · As of 4:00 PM ET 11/06/26

Worth buying at $116?

At about $116, Oracle stock costs about 10 times fiscal 2028’s expected adjusted earnings per share (that fiscal year ends in May 2028). For a company growing revenue by roughly 30%, I think this price is low enough to absorb an additional 3% of shares and the added interest.

That said, Oracle’s borrowings were already about $125 billion at the end of August, before the new notes. If AI customers cut back before free cash flow goes positive, that debt might matter much more than the dilution.

I’d consider buying Oracle around the $116 its new shareholders paid, maybe adding shares bit by bit. Oracle expects capital spending to peak this fiscal year and next, so the highest spending isn’t over yet.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.