Oracle is under pressure from rising debt and the risk of another credit downgrade as it doubles down on AI infrastructure, according to a Reuters report cited by BlockBeats on Aug. 5.
By the end of fiscal 2026, Oracle had signed about $260 billion in data center lease commitments, the report said, with some of those leases set to start next year. Because cash reserves are limited, the company has used heavy borrowing and long-dated leases to expand AI computing capacity, adding strain to its balance sheet.
Leverage climbs as rating slips to BBB-
Oracle’s debt now stands at about $129.5 billion, equal to 4.3 times EBITDA over the past 12 months. Reuters said that is well above the less-than-1-times level reported for peers such as Alphabet, Amazon, Microsoft and Meta.
S&P Global Ratings cut Oracle’s credit rating to BBB- in July, leaving it one notch above junk. Moody’s had previously said Oracle’s leverage could rise sharply during the AI infrastructure buildout phase and may approach 5 times in the near term. If leverage stays above 4.5 times, S&P could lower the rating again.
Capital spending could reach $95 billion
Oracle expects capital expenditures to reach as much as $95 billion in fiscal 2027, with part of that amount to be paid by customers. The company said it would keep a disciplined approach to capital allocation and maintain an investment-grade credit rating.
Lease duration mismatch is a core market concern
Market concern is centered on the gap between long-term data center leases and the shorter cycle of AI demand. Oracle’s data center leases typically run for 15 to 19 years, while customer contracts may last only a few years. If AI demand growth slows in the future, the company could be left with heavy fixed-cost pressure.
The report also said Oracle’s future revenue is highly dependent on AI customers. Its remaining performance obligations, or RPO, have reached $638 billion, with nearly half tied to OpenAI-related contracts.
Stock, bonds and CDS reflect credit worries
Oracle shares have fallen about 50% since June. Its bond yields have climbed into the 7% to 8% range, and its credit default swap, or CDS, levels have risen to the highest point in 18 years. Investors are reassessing the balance between growth tied to AI infrastructure investment and the debt risk that comes with it.