Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTVidya RanganathanTue, August 4, 2026 at 7:19 PM GMT+2 7 min readBy Vidya RanganathanLONDON, Aug 4 (Reuters) - Cloud computing giant Oracle Corp is on the cusp of a junk-grade credit rating and its shares have tanked as the artificial intelligence hyperscaler becomes the fall guy of investors' concerns over the sector's debt-fuelled spending binge.The U.S. multinational is an outlier among top software firms racing to buy chips and build computing power to leapfrog the AI boom, forced by its limited cash reserves to borrow heavily and undertake massive long-term leases.The extent of the splurge came to light in June, when Oracle's results for the fiscal year ending in May 2026 showed its free cash flows were negative, the bulk of its revenue was spent on capital expenditure and it had signed roughly $260 billion of data centre leases, some starting next year.The disclosures rattled investors and put Oracle squarely in the crosshairs of ratings agencies which have long warned about the company's heavily leveraged balance sheet.S&P Global Ratings was the first to move, lowering Oracle's credit rating to BBB-, one notch above junk, in July.As per Oracle's reported numbers, its debt of $129.5 billion was roughly 4.3 times EBITDA, or earnings before expenses such as interest payments, depreciation, taxes and amortisation.A debt-EBITDA ratio above 4 signals financial strains, but the ratio can vary with methods and metrics each analyst uses.Oracle's peers Alphabet Inc., Amazon, Microsoft Corp. and Meta Platforms Inc. have ratios under 1.Oracle's massive lease commitments, which it does not yet have to count as debt but which analysts include in estimates, paint an even more worrying picture."While multiple other hyperscaler providers are building out AI infrastructure, none are as leveraged or cash flow negative as Oracle entering into this build phase," Moody's Ratings said in its February note explaining its negative outlook on a Baa2 rating, one tick above S&P's.Despite the scale and profitability of its software business, "leverage will increase materially in the near term and could approach 5x temporarily," Moody's said.The funding needs are so large, Oracle will need to issue more debt despite its ratings being severely constrained, while it also cuts back on share buybacks and raises equity capital too, analysts said.Oracle expects capital expenditures of up to $95 billion in fiscal 2027, though it expects repayments from customers for up to $25 billion of that.Oracle declined comment for this article. In earnings calls, it said it remains committed to disciplined capital allocation and preserving its investment-grade credit rating.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info