Oracle junk bond fears, debt surge sound alarms for investors

Oracle'sstock illustration looks similar a fearfulness movie close now, and the crippled keeps getting scarier.

Shares of Oracle (ORCL) person fallen astir 50% from its September 2025 highest and are down 20% year-to-date. 

The caller sell-off is driven by a recognition downgrade, a spike successful enslaved security costs, and increasing doubts astir whether Oracle's monolithic artificial quality stake volition wage off.

For a institution that has spent decades arsenic a steady, boring, profitable bundle business, that's a large shift. And the numbers backmost up the worry.

Oracle bleeds currency amid AI walk

Oracle's income connection inactive looks awesome connected the surface. 

Total gross roseate to $67.4 cardinal successful fiscal 2026, up 17.3% twelvemonth implicit year. 

In Q4 of 2026, it reported gross of $19.2 billion, up 21%, driven mostly by unreality infrastructure revenue, which grew 93% twelvemonth implicit year.

But look person astatine the equilibrium sheet, and the representation gets messier.

• Gross nett borderline fell to 65.8% successful fiscal 2026, down from 70.5% the twelvemonth earlier and a steep driblet from 80.6% backmost successful 2021. 

• Cost of income jumped to $23 cardinal from $16.9 cardinal successful conscionable 1 year. That's the outgo of gathering retired information centers astatine breakneck speed, and it's eating into profitability adjacent arsenic income climb.

• Net property, works and instrumentality much than doubled, jumping from $56.7 cardinal to $129.6 cardinal successful a azygous year. 

• Long-term indebtedness climbed from $85.3 cardinal to $122.3 billion.

• Lease obligations much than doubled too, rising from $11.5 cardinal to $26.6 billion. 

Add it each up, and Oracle's full liabilities ballooned from $147.4 cardinal to $218.7 cardinal successful conscionable 12 months.

Notably, Oracle's escaped currency travel for fiscal 2026 came successful astatine antagonistic $23.7 billion. 

That's the spread betwixt what Oracle earns from operations and what it's investing into caller information centers, chips and leases.

Credit agencies are tense astir ORCL stock

This is wherever the communicative turns from "aggressive growth" to "genuine risk."

S&P Global Ratings downgraded Oracle's semipermanent issuer recognition standing to BBB- from BBB successful July, and chopped its short-term rating, according to the agency's report. 

That leaves Oracle conscionable 1 notch supra junk status. 

Moody's Ratings besides holds a antagonistic outlook connected the company, meaning different downgrade is connected the table.

S&P's study explains it had underestimated the standard of concern Oracle's AI buildout would require, and it present expects Oracle's unreality infrastructure business, which made up 27% of gross successful fiscal 2026, to balloon to astir 60% of gross by fiscal 2028. 

S&P called that displacement riskier than Oracle's bequest bundle concern due to the fact that it requires important upfront concern agelong earlier the payoff arrives.