Oracle Downgraded to BBB‑ with $167 bn Debt Shadow
Oracle Corp. (NYSE: ORCL) shares gained about 2.7% on Thursday, trading in positive territory despite S&P Global Ratings lowering the company’s long‑term issuer credit rating from BBB to BBB‑, while keeping a stable outlook. The downgrade places Oracle just one notch above speculative grade and is presented as a psychological and financial blow for the tech blue‑chip.
S&P’s analysis cites a massive pivot into artificial‑intelligence infrastructure as the primary source of heightened structural risk. The agency now expects Oracle’s fiscal 2027 capital expenditures to rise sharply to a range of $90 billion‑$95 billion, up from its earlier $60 billion forecast. Correspondingly, free operating cash‑flow for fiscal 2027 is projected to run a deficit of $42 billion, nearly double the previously anticipated $24 billion shortfall. Adjusted debt‑to‑leverage ratios are forecast to reach the mid‑4x area in fiscal 2027, crossing the threshold S&P deems safe for a BBB‑profile rating.
Customer concentration adds to the credit concerns: OpenAI, a startup pioneer, accounts for roughly half of Oracle’s remaining performance obligations, exposing the company to volatility in the AI sector’s competitive and profitability trajectory.
On the balance‑sheet side, Oracle carries $167 billion of total debt. To shore up its capital structure and preserve its remaining investment‑grade rating, the company is turning to equity dilution. After issuing $5 billion of mandatory convertible preferred stock in February 2026, Oracle announced plans for an additional $20 billion equity issuance later in the calendar year, with expectations to raise “tens of billions” over the next three years.
Investors appear to be focusing on Oracle’s $638 billion backlog of cloud contracts, which provides a substantial revenue runway, even as the downgrade highlights the looming debt burden and leverage escalation.