Oracle projects $30B free cash flow by 2029, calming fears over AI infrastructure spending spree

Oracle beats expectations with $30 billion free cash flow projection

Oracle1

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shares surged 14% after the company announced financial forecasts that significantly exceeded Wall Street's expectations at its annual investor day in Las Vegas. Chief financial officer Hilary Maxson2

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revealed Oracle projects $30 billion in free cash flow by the end of its 2029 fiscal year, a stark contrast to analysts' predictions that the company would remain cash flow negative until 2030. The announcement directly addresses mounting investor anxiety about Oracle's AI bet1

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and its aggressive pivot from database software to AI infrastructure expansion.

The company's bonds rallied alongside its stock, with 30-year notes trading at approximately 83 cents on the dollar, up from a low of 79 cents in mid-October1

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. This recovery signals renewed confidence in Oracle's ability to execute its AI data center strategy despite previous concerns about the sustainability of its spending levels.

Limited fundraising caps AI spending spree concerns

Maxson told investors that Oracle will limit additional fundraising to support its AI infrastructure expansion to $20 billion between now and its 2030 fiscal year, split evenly between debt and equity1

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. This cap on new capital raises addresses a critical concern for lenders and investors who watched Oracle's free cash flow plummet to minus $23.7 billion in the year ending May 2026 after the company spent $55.7 billion on data centers2

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The company plans to bridge the funding gap through alternative financing methods. "Vendor financing, customer-provided hardware and customer prepayments are expected to reduce upfront cash requirements through the transition to positive free cash flow,"2

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Oracle stated. BNP Paribas analyst Stefan Slowinski3

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noted that Oracle increasingly relies on vendor financing and bring-your-own-hardware arrangements for new projects, reducing upfront capital expenditure demands.

Capital expenditure peaks as self-funded business model emerges

Maxson revealed that capital expenditure will peak by 2028, with growth becoming "self-funded" starting in 20291

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. Slowinski's analysis indicates Oracle expects capital expenditures to peak in fiscal 2027 and 2028, remaining relatively flat year over year before free cash flow turns positive in the second half of fiscal 20283

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. The company forecasts 100% free-cash-flow conversion once new infrastructure capacity becomes operational, supporting a more self-funded business model3

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Oracle aims to keep net debt below 3.5 times adjusted EBITDA3

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, a metric closely watched by credit rating agencies. The company's corporate credit rating currently sits one notch above junk following a downgrade from S&P in July1

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, making financial discipline critical for maintaining investment-grade status.

Competing with cloud giants through massive data center capacity expansion

Oracle is attempting to pivot from business software to AI cloud services that can compete with Amazon and Google1

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in selling computing power to companies like OpenAI1

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. Maxson announced the company expects to deliver seven gigawatts of data center capacity to customers in the "next couple of years,"1

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taking its fleet past 10 gigawatts by the end of fiscal 20282

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The company has raised pricing on new five-year contracts to approximately $16 billion per gigawatt from about $10 billion3

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. Management believes this higher pricing could support a 28% return on invested capital3

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, demonstrating confidence in the value proposition of Oracle's AI infrastructure offerings. At the investor conference, Oracle also announced it would rent out Google's2

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chips in its cloud, expanding its technology partnerships.

Project delays and operational challenges persist

Despite optimistic financial forecasts, Oracle faces significant operational hurdles in executing its AI data center strategy. Several projects have been beset with permitting and construction delays1

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. In September, Oracle sent Blue Owl subsidiary Stack Infrastructure—the developer of a 1,400-acre campus in Doña Ana County, New Mexico—a force majeure notice to defer payments should the project fail to come online in 2028 as planned1

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The company has faced delays accessing power at a site in Wisconsin and experienced pushback from the local community around a project in Michigan1

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. Slowinski noted that Oracle's diversified global infrastructure network should provide flexibility to manage potential project delays3

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, suggesting the company has built redundancy into its expansion plans.

Revenue targets and margin pressure ahead

Oracle maintained its fiscal 2030 target of at least $225 billion in revenue2

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and earnings of more than $21 per share3

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. However, Slowinski expects adjusted operating margins to face pressure during the AI infrastructure expansion before recovering to more than 40%3

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. This temporary margin compression reflects the upfront costs of building data center capacity before revenue from those facilities materializes.

BNP Paribas maintains an Outperform rating3

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on Oracle with a $248 price target. Slowinski believes Oracle trades at approximately 10 times projected fiscal 2029 earnings and sees substantial potential for revenue, earnings and free-cash-flow growth as the company expands its AI infrastructure business3

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. Bloomberg Intelligence analyst Anurag Rana said the plan "could ease concern about elevated capital spending beyond the next two years,"2

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though he noted AI spending is squeezing cash flow across Big Tech.