Oracle gave Larry Ellison and his co-CEOs nearly $1 billion in stock options that are now underwater
Oracle awarded co-founder Larry Ellison and his new co-CEOs stock option packages with a combined value as of the grant date of $988 million in fiscal 2026, a year that saw its cloud business explode and its shares post a 38% total return. At the end of the fiscal year on May 31, each of these options was unexploited.
The drop isn’t surprising, considering Oracle stock’s volatile year and the fact that options prices were near the top. Oracle, alongside other large-cap technology companies, has rushed to finance and build data centers while spending $55.7 billion in capital over the last fiscal year. On Friday, Oracle stock closed at $137, down 53% over the past 12 months. The company’s proxy statement released Friday highlighted the decline in all three packages, noting that their awards “had no intrinsic value” at the end of the fiscal year. The option strike prices, i.e. the price at which the options can be cashed in, are higher than the current price of Oracle stock.
Ellison’s award was valued at $117.8 million when it was granted in October and carries a strike price of $280, while the strike price for co-CEOs Clay Magouyrk and Mike Sicilia is $308. Magouyrk and Sicilia received their packages, valued at $621.7 million and $248.7 million, respectively, just days after their September 2025 promotions. The duo succeeded ex-CEO Safra Catz, who remains executive vice president. The stock needs to more than double for Magouyrk and Sicilia to take advantage of their options.
Conversely, new CFO Hilary Maxson, appointed in April 2026, opted for a new program that Oracle rolled out in fiscal 2026. Under the “Equity Choice Program,” executives can choose to obtain their fixed-term equity in the form of 100% stock options, 100% restricted stock units, or a 50-50 combination of options purchase of shares and RSUs.
If you choose stock options, you get four times as many options as the number of RSUs that would have been granted, because stock options are only worth it if the stock price increases. The problem, however, is that if the stock falls like it has, these options are completely out of the money. (Oracle prices its options differently than other companies, treating four options as a single stock. Its own numbers total $400 million for Ellison, Magouyrk and Sicilia.)
Maxson was hired with total compensation of approximately $30 million, including a $26 million stock award and chose to invest $10.4 million in RSUs, according to Oracle disclosures. The shares were worth $12.7 million at the end of the fiscal year and fell to $7.7 million based on Friday’s stock close. The rest of its reward is options priced at $185, which are also underwater. Catz, chief legal officer Stuart Levey and chief operating officer Douglas Kehring all opted for RSUs, while president of global field operations Mark Hura chose options.
According to Oracle, the size of the awards is driven by the competitive recruiting market for seasoned cloud and AI leaders. In its proxy statement, Oracle told investors that the fact that Ellison and the co-CEOs’ options had no intrinsic value meant the plan was working as intended. Stock options, which have largely disappeared among publicly traded Fortune 500 companies in favor of performance stocks and RSUs, “are heavily performance-based,” Oracle’s board said in the report.
“The compensation committee has not taken any specific action to compensate executives for potential losses in value of stock options,” the company wrote.
Meanwhile, despite volatility and falling stock prices, cloud revenue grew 39% to $34 billion, cloud infrastructure revenue grew 77% to $18.1 billion, and overall revenue grew 17% to $67.4 billion. Remaining performance obligations increased to $638 billion at the end of the fiscal year, up from $138 billion the previous fiscal year.
However, the company’s 10-K indicates that free cash flow was negative $23.7 billion and Oracle sold $43 billion of senior securities. Over the summer, Oracle sold $20 billion worth of stock at $141 per share. In turn, investors punished the stock. Bloomberg reported this week that Oracle’s decision to invoke force majeure on a New Mexico data center pushed the cost of insuring its debt against default to a record high.
Nonetheless, the fiscal 2026 results were enough to ensure liquidity for Ellison and the co-CEOs. All three received $4.9 million in cash bonuses. Ellison even got a raise, going from a base salary of $1 to $950,000, like Magouyrk and Sicilia.
It hasn’t been such a fun time for Oracle employees, however. Oracle has been reducing its workforce through layoffs, and the majority of its outstanding company-wide options are also underwater. Total compensation for Oracle’s median global employee was $94,740 for fiscal 2026, compared to $98,899 for fiscal 2025.
Oracle did not immediately respond to a request for comment. Shareholders will vote on his compensation plan on November 18.
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