Oracle's Cash Is Vanishing - But Larry Ellison's Dividend Check Still Clears Tomorrow

Oracle's cash flow story is a classic case of smart money betting against the headline. The company's underlying business is strong, with operating cash flow of $22.3 billion over the last twelve months, up 10% year-over-year. That's the reserve that built its reputation. But the real action is where that cash is going.

The plan is to consume it. Oracle is committing to a massive, debt-funded AI bet. The company has forecast capital expenditures of $50 billion for fiscal 2026. To fund this, it's planning a debt offering of $38 billion to $75 billion. That's a profound change in capital posture, shifting from a cash-rich fortress to a leveraged challenger. The cash flow is being used to pay for the future, not to sit idle.

This creates a clear tension with the dividend. The company paid a $0.50 per share dividend on January 23, 2026, yielding 1.0%. That payout is sustainable from current cash flow. But it's also a signal of confidence in the near-term. The real risk is that the heavy capex and debt load will pressure that cash flow down the road, making future dividend increases harder to justify.

The setup is a classic short-term payout for a long-term, high-risk bet. The smart money is watching to see if the AI investments pay off before the debt burden becomes a problem.

The Dividend Trap: Smart Money vs. Hype

The dividend check cleared yesterday, but the real signal is in the selling. While Oracle pays out cash to shareholders, key insiders are taking their own money out. This is a classic test of alignment of interest.

The CFO, Douglas Kehring, sold 35,000 shares on January 15 at $194.89. That's a pre-arranged plan, but the timing is telling. He's cashing out just as the company is planning a $38 billion debt offering to fund a $50 billion AI capital expenditure plan. Another insider, Mark Hura, sold $2.95 million worth of shares in December, cutting his position by over 6%. These aren't small transactions. They represent skin in the game being reduced at a moment of profound financial change.

Viewed another way, this selling suggests a level of skepticism from those closest to the numbers. The smart money is asking: Is the debt-fueled AI bet worth the risk to Oracle's balance sheet and its ability to sustain dividends? The CFO's sale, in particular, is a notable signal. He's not just an officer; he's the gatekeeper of the company's financial health. When the person responsible for that health is selling shares while the company is taking on massive new debt, it raises a red flag.

The setup is a trap for the unwary. The company is hyping its AI future and paying a dividend, but the insiders are cashing out. This disconnect between the corporate narrative and insider behavior is a powerful warning. It suggests that while the AI investments may be necessary, the financial path to get there is fraught, and the people who know the most are hedging their bets.

Catalysts and Risks: The Debt Run and AI Payoff

The immediate catalyst is the debt run itself. Oracle is preparing for a $38 billion debt offering as soon as next week, with the potential to scale to $75 billion. This isn't just a financing event; it's a stress test for market appetite and a direct measure of the risk premium investors are demanding. The offering will push total debt to about $104 billion, a level that fundamentally changes the company's financial profile. The smart money will watch the pricing and demand for these bonds closely. If the offering is undersubscribed or priced at a high yield, it signals that creditors see a material increase in execution risk.

The key risk is execution. Oracle is betting its future on an AI infrastructure build-out that must generate explosive cloud revenue to service the new debt and maintain the dividend. The company has a massive backlog, with remaining performance obligations spiking 359% to $455 billion. But that's a promise, not a payment. The real test is whether the AI-led cloud growth can materialize quickly enough to cover the interest on a $104 billion debt load. As one analyst noted, Oracle is borrowing to provide capacity for startups, a high-risk move that could backfire if customer demand stalls or if the infrastructure costs eat into margins.

The primary scenario to watch is the trajectory of net leverage and free cash flow, not just headline cloud growth. The company's capital posture is shifting from one funded by retained earnings to one reliant on bank-led structures. This change introduces new duration and dependency risks for enterprise buyers. For investors, the critical question is whether the AI investments will eventually boost free cash flow to a level that can comfortably cover debt service and dividends. Until that cash flow ramp is clear, the debt run remains a high-wire act.