Oracle’s $300B AI Deal with OpenAI Faces $25B/Year Funding Hurdle Amid Massive Debt

Oracle’s emerging deal with OpenAI, reportedly valued at ~$300 billion over five years starting in 2027, represents a transformative inflection in cloud infrastructure demand and financial commitment. KeyBanc analysts suggest that to support this deal, Oracle will need to raise about $100 billion in debt over the next four years (~$25 billion annually) to build out sufficient compute capacity. This projection exceeds earlier commitments tied to its July deal, which projected ~$30 billion per year starting in 2028 for 4.5 GW of capacity. [1]

Oracle’s recently reported Q1 FY2026 results provide context: total remaining performance obligations have swelled ~359% year-over-year to $455 billion, indicating aggressive contract wins in AI and cloud infrastructure. However, free cash flow is under pressure, with capex spending ballooning and near-term liabilities such as debt coming due. [2]

The finance requirements associated with the OpenAI contract are particularly heavy. Oracle’s balance sheet shows long-term debt near $82 billion as of late August, and bond issuances (e.g., $18 billion) have recently been used to fund incremental infrastructure investment. Cash and equivalents are modest in relation to these obligations. [1]

From a strategic standpoint, Oracle stands to gain substantially if demand for high-performance cloud infrastructure and computational services increases as AI models scale. The bump in performance obligations, revenue growth especially in infrastructure (IaaS), and investor confidence all suggest that markets expect Oracle to deliver. However, risks loom large: any delays in data center construction, escalation in hardware or energy costs, supply constraints (e.g., high-end GPUs, power, land), and whether OpenAI itself can meet its $300 billion commitment through revenue or external funding. Also, the high leverage could expose Oracle to interest rate risk, cost of capital pressures, and margin compression.

Open questions include: what financing mix Oracle will use (traditional debt vs. off-balance-sheet structures), what the actual delivery schedule will look like against the announced start dates (2027 for the $300 bn deal, 2028 for the 4.5 GW plan), how Oracle will secure and scale energy and supply chain inputs (GPUs, servers, real estate), and how OpenAI’s revenue progression will align with its capital needs.