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Oracle Downgraded to BBB- by S&P
July 10, 2026
– Vandit P
Oracle was downgraded by a notch to BBB- from BBB by S&P, citing Oracle’s rapidly expanding AI infrastructure business, that has raised overall credit risk. Oracle has seen rising capital expenditures, an uncertain path to profitability, a fast-evolving competitive landscape, and high customer concentration, as per S&P. The company’s cloud infrastructure business accounted for 27% of revenue in fiscal 2026 and is projected to reach almost 60% by fiscal 2028, representing a riskier mix than its legacy software and database operations. Oracle guided capex to $90-95bn for fiscal 2027, well above S&P’s earlier $60bn estimate, driven by rising component costs and new contract wins. The rating agency now forecasts a free cash flow deficit of nearly $42bn, far higher than its prior $24bn projection for fiscal 2027. S&P expects the cash flow deficit to narrow to about $25bn in fiscal 2028 and turn positive by 2029. OpenAI, estimated to account for roughly half of Oracle’s $638bn in remaining performance obligations, was flagged as a key credit risk given its financing needs.
Oracle’s 4.125% 2045s were lower by 0.7 points to trade at 67.9 cents on the dollar, yielding 7.3%.
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