Oracle Bone Cloud AI Expansion Bet Triggers Credit Risk, Rating Approaches 'Junk Level'

BlockBeats News, August 5th, according to Reuters, Oracle is facing debt pressure and credit rating downgrade risk due to a massive bet on AI infrastructure construction, becoming a focal point of market concerns about the AI capital spending frenzy.

The report stated that as of the end of the 2026 fiscal year, Oracle had signed commitments for around $260 billion in data center leases, with some leases set to begin execution next year. Due to limited cash reserves, the company has driven AI computing power expansion through large-scale borrowing and long-term leases, leading to a significant increase in its balance sheet pressure.

Data shows that Oracle's current debt level is approximately $129.5 billion, about 4.3 times the past 12 months' EBITDA, much higher than peers such as Alphabet, Amazon, Microsoft, and Meta, which are below 1 time. Standard & Poor's Global Ratings downgraded Oracle's credit rating to BBB- in July, just above the "junk" level.

Moody's previously stated that Oracle's leverage ratio during the AI infrastructure construction phase could rise sharply, possibly approaching 5 times in the short term. If the company's leverage ratio remains above 4.5 times, S&P may further downgrade its rating.

Oracle expects its capital expenditures in the 2027 fiscal year to peak at $95 billion, some of which will be paid by customers. The company stated that it will adhere to disciplined capital allocation and maintain an investment-grade credit rating.

Market concerns are mainly focused on the mismatch between data center lease terms and AI demand. Oracle's data center leases are typically 15 to 19 years long, while customer contract cycles may be only a few years. If future AI demand growth slows down, the company may face high fixed cost pressures.

In addition, Oracle's future revenue is highly dependent on AI customers. The Remaining Performance Obligation (RPO) scale has reached $638 billion, with close to half coming from OpenAI-related contracts. Analysts believe that the continued growth in AI demand and customer fulfillment capabilities will be key to Oracle's ability to deliver investment returns.

In recent months, Oracle's stock price has fallen by about 50% since June, the company's bond yield has risen to the 7%-8% range, and the market credit risk indicator CDS has reached a high not seen in 18 years. Investors are reassessing the balance between the high-growth opportunities brought by AI infrastructure investment and debt risk.