Summary
Bernstein projects that Oracle Corporation's planned $45 billion to $50 billion capital raise will cover the costs of its AI data center expansion through fiscal 2028. The research house highlighted that clarifying the financing mix - a combination of equity-linked and common equity together with senior unsecured bonds - should alleviate investor uncertainty about how the company intends to pay for the build-out. Oracle's shares rose more than 4% in Monday premarket trading following the financing details.
Planned financing structure
According to Bernstein, Oracle intends to source roughly half of the capital through equity-linked and common equity issuances. That package includes mandatory convertible preferred securities and a new at-the-market equity program of up to $20 billion. The remaining half of the raise is slated to come from senior unsecured bond issuance planned for early 2026. Bernstein also noted that Oracle has already completed a $25 billion debt raise.
Model updates: interest expense and dilution
In an updated financial model, Bernstein expects Oracle's interest expense to increase from about $1 billion in the second quarter of fiscal 2026 to approximately $1.6 billion per quarter starting in the fourth quarter of fiscal 2026, with a partial step-up in the third quarter. The research house estimates share dilution from common stock and the mandatory convertible preferred securities at about 5%, with the exact figure dependent on Oracle's share price at issuance.
Investor implications and rating
Bernstein said that with most of Oracle's funding needs now defined, one of the central investor concerns - how the expansion will be financed - should begin to ease. The firm added that other questions related to profitability and customer concentration risk are expected to become clearer over the coming year as Oracle scales its cloud infrastructure.
The brokerage maintained an Outperform rating on Oracle but lowered its price target to $313. The reduced target reflects revised assumptions around the company's mix of debt and equity funding and a lower valuation multiple to align with peers amid ongoing debate about the ultimate scale of the data center investment. Bernstein described the stock as offering an entry point as Oracle increases spending to support cloud and AI demand, which it expects to accelerate revenue and earnings growth over time.
Key takeaways
- Bernstein believes the $45 billion to $50 billion financing plan should cover Oracle's AI data center expansion through fiscal 2028.
- The funding is expected to be split roughly evenly between equity-linked/common equity (including a $20 billion at-the-market program) and senior unsecured bonds issued in early 2026; $25 billion of debt has already been raised.
- Interest expense is modeled to rise to about $1.6 billion per quarter by the fourth quarter of fiscal 2026, and share dilution from equity issuance is estimated at about 5% depending on the share price.
Risks and uncertainties
- Interest-cost pressure - rising quarterly interest expense could affect profitability as the company executes its build-out, impacting financials for creditors and equity investors.
- Share dilution - issuance of common stock and mandatory convertible preferred securities could dilute existing shareholders by an estimated 5%, subject to share-price-dependent mechanics.
- Execution and concentration risk - questions tied to profitability and customer concentration remain and are expected to be resolved only as the cloud infrastructure scales, creating uncertainty for stakeholders in the cloud and enterprise software sectors.
Conclusion
Bernstein's assessment frames Oracle's capital plan as sufficiently comprehensive to fund the AI-driven data center expansion through fiscal 2028, while acknowledging near-term impacts on interest expense and share count. The research house's maintained Outperform rating and lowered $313 price target reflect a view that clarified funding reduces a major overhang, even as valuation assumptions are tightened to align with peers during debate over investment scale.