Oracle stock is testing the $140 level as the software giant faces mounting pressure from a credit downgrade and escalating AI capital expenditures that have turned free cash flow negative. S&P Global Ratings downgraded Oracle on July 9, 2026, cutting its long-term issuer credit rating from BBB to BBB-, placing the company just one notch above junk status.
The downgrade reflects Oracle’s aggressive pivot to AI infrastructure. In fiscal 2026, capital expenditures jumped 162% to $55.7 billion, far exceeding the company’s prior $50 billion guidance and Wall Street’s $50.9 billion consensus estimate. This spending surge left Oracle with negative free cash flow of $23.7 billion for the fiscal year, despite generating $32 billion in operating cash flow.
S&P analysts wrote that Oracle’s “growing AI infrastructure business is diluting its strong business risk profile,” adding they had “previously underestimated the scale of the investments required to expand the AI business and its impact on our overall view of Oracle’s creditworthiness.” The downgrade maintained a stable outlook, meaning no further immediate cuts are expected if Oracle stabilizes its financial metrics.
Oracle’s spending surge underscores the company’s commitment to competing in the AI data center race. The company plans to raise nearly $40 billion in debt and equity financing during fiscal 2027 to fund its expansion, and has already projected net capital expenditure of around $70 billion for the current fiscal year. Oracle’s remaining performance obligations—a measure of future contract value—grew $85 billion in Q4 alone, reaching $638 billion, signaling strong customer demand for its cloud and AI services.
The stock’s struggle near $140 reflects investor concerns about whether Oracle’s massive AI investment will generate adequate returns. The company reported record quarterly revenue, with cloud revenue up 47% year-over-year, yet the negative cash flow and rising debt load have overshadowed earnings strength. Oracle’s debt stood at approximately $130 billion as of late May, and the downgrade signals lenders’ worry about the company’s ability to service that debt while funding its AI buildout.
Sources
- Wall Street Journal — S&P Global downgraded Oracle from BBB to BBB- on July 9, 2026, citing rising business risk and weaker cash flow
- S&P Global — Official downgrade announcement and rationale for the credit rating cut
- CNBC — Oracle’s fiscal 2026 capital expenditures of $55.7 billion, a 162% increase, and free cash flow impact
- Oracle Investor Relations — Fiscal 2026 financial results showing negative free cash flow of $23.7 billion and capex of $55.7 billion
- Reuters — Oracle’s plans to raise $40 billion in debt and equity financing and fiscal 2027 capex guidance of $70 billion
- Yahoo Finance — Oracle stock price trading near $140 and S&P downgrade to BBB-
