Oracle funds AI push through heavy borrowing, rating near junk
Oracle is making big moves in AI, but it's borrowing a lot to do it, so much that its credit rating is just above junk status, Reuters reported on August 5.
Unlike tech giants like Alphabet and Microsoft, Oracle has taken on heavy long-term leases and debt because its cash reserves are limited.
S&P downgraded Oracle, Moody's flagged concerns
Oracle's latest numbers show negative free cash flow and a debt-to-EBITDA ratio of 4.3, way higher than its competitors.
This led S&P to downgrade Oracle's rating in July, while Moody's flagged concerns about rising debt.
With shares down 50% since June 2026 and bond yields climbing to 7% to 8%, analysts are uneasy about Oracle's $95 billion spending plans for next year, and the fact that nearly half of Oracle's remaining performance obligations are linked to contracts with OpenAI.
If the company keeps up this level of borrowing, more credit downgrades could be ahead.