Oracle clears the supply cloud with record demand

Oracle returned to the bond market yesterday, just five months after its $18 billion September jumbo deal, finally removing the cloud of uncertainty around supply that has hung over the credit. Since September, bonds have drifted 60–80bps wider and the equity has shed roughly half its value, as investors wrestle with the scale of AI capex and Oracle’s heavy reliance on OpenAI. The encouraging market reaction to yesterday’s deal underscores that recent bond weakness has been driven less by fundamentals and more by lingering supply technicals.

Ahead of the deal, Oracle outlined plans to raise $45–50 billion in 2026 to fund the expansion of its cloud infrastructure, split roughly 50/50 between debt and equity. This is a lighter debt mix than many had anticipated and a clear positive for bondholders who feared they would be asked to fund the entire bill.

The debt component will come via a single, one-time senior unsecured bond issuance, while the equity will be raised through a mandatory convertible and common stock program, helping contain leverage and protect ratings. Crucially, committing to a single bond deal finally gives the market clarity on supply, lifting the overhang that has weighed on spreads, and in credit, clarity lowers risk premia. 

The announcement was also supported by the rating agencies. Fitch affirmed Oracle’s BBB rating, while S&P and Moody’s maintained negative outlooks as free cash flow remains pressured by heavy capex and is likely to stay negative in the near term. Still, the ratings actions provide welcome clarity and reduce the immediate risk of a downgrade.

Recent price action highlights how sensitive investors have become to supply technicals, and it’s encouraging to see the bond market imposing discipline on hyperscaler issuers. Oracle’s $18 billion bond deal in September 2025 printed with a massive $90 billion order book and initially looked like a success, but the bonds have since sold off materially, trading roughly 60–80bps wide of their issuance level as the market digested the prospect of repeated, jumbo issuance across all hyperscalers. This wasn’t a fundamentals story, but a technical one: unclear supply kept investors demanding wider spreads.

That’s why the reaction to the new announcement has been so telling: despite launching another $20–25 billion deal, secondary spreads have rallied around 30bps across the curve, a rare move for a large, frequent issuer. Removing issuance uncertainty along with some clarity from the rating agencies has been very welcomed. 

Yesterday’s eight-tranche deal drew record demand, at its peak order books were around $129 billion, breaking Meta’s previous $125 billion record for its $30 billion transaction last October. Pricing tightened by roughly 30bps across the curve from IPTs (initial price talks), with the 10-year landing at 145bps. Notably, Oracle’s outstanding 10-year bonds were trading closer to +175bps in secondary prior to the announcement and for context, the US BBB corporate index trades around +95bps, underscoring the supply and AI uncertainty premium investors demand. 

Going forward, we expect Oracle bonds to be driven by fundamentals rather than supply technicals. On the equity and CDS side, these will likely continue to be vehicles for expressing views on the success, or otherwise, of OpenAI, now its largest data centre customer.

Oracle, the biggest US corporate issuer outside financials, may have cleared the path for itself, but the broader hyperscaler wave is only starting. Bank of America’s survey points to roughly $190 billion of issuance from hyperscalers this year. The market will watch closely as AWS, Microsoft, Meta and Alphabet step up, and those who don’t bring clarity could find spreads punished. 

AI may dominate every roadshow, but funding it will require real balance sheet discipline. We remain selective across the sector, favouring infrastructure and data centres, rather than credits tied directly to the success of AI models. Oracle demonstrates that when issuers bring clarity and equity, bond markets are willing to engage.