Oracle stock hit a fresh 52-week low of $121.50 on Friday, July 19, marking a 63% decline from its peak of $345.72 in September 2025 as investors react to mounting financial strain from the company’s massive artificial intelligence infrastructure build-out. The sell-off follows S&P Global’s downgrade of Oracle’s credit rating to BBB- on July 9, leaving the database and cloud computing giant just one notch above junk status.
S&P cited the enormous cost of Oracle’s AI data center expansion as the primary driver of the downgrade. The company spent $55.7 billion on capital expenditures in fiscal 2026 (ended May 31, 2026), burning through its operating cash flow and posting negative free cash flow of $23.7 billion for the year. S&P projects the situation will worsen, forecasting Oracle’s fiscal 2027 capital expenditures will rocket to $90 billion to $95 billion, with the free operating cash flow deficit expected to widen to approximately $42 billion.
Oracle’s debt load has swelled alongside the spending spree. The company carried nearly $130 billion in borrowings at the end of fiscal 2026 and has $167 billion in total debt. To keep its head above water and preserve its investment-grade rating, Oracle is aggressively turning to equity dilution: the company issued $5 billion of mandatory convertible preferred stock in February 2026 and plans an additional $20 billion equity issuance later this calendar year.
The financial strain sits uncomfortably alongside Oracle’s otherwise strong operational performance. Fiscal 2026 revenue rose 17% year-over-year to $67.4 billion, and the company’s cloud infrastructure business—the division actually selling AI computing capacity—grew 93% year-over-year in the fourth quarter to $5.8 billion. Oracle’s backlog of contracted cloud revenue reached a staggering $638 billion, up 363% year-over-year.
Yet the backlog carries a concentration risk that amplifies S&P’s concerns. Roughly half of Oracle’s remaining performance obligations come from a single customer: OpenAI, the unprofitable startup behind ChatGPT. If OpenAI struggles to fund its infrastructure commitments or faces competitive pressure, Oracle could be left holding costly data centers built for demand that never materializes. S&P noted this as a key credit risk, citing the company’s exposure to OpenAI’s volatile path to profitability.
Oracle has moved to offset some of the financing burden through customer arrangements. About $75 billion of recent large AI contracts involve customers prepaying for graphics processing units (GPUs) or supplying the chips themselves, shifting some of the build-out’s cost off Oracle’s balance sheet. Still, the company’s adjusted debt-to-leverage ratio is expected to hit the mid-4x area in fiscal 2027, crossing the line S&P considers safe for a standard BBB-rated company.
The downgrade reflects a broader market concern: Oracle’s opportunity in AI, once viewed as a long-term growth engine, is now priced as a balance-sheet problem. At current levels near $127 per share, Oracle trades at roughly 16 times the adjusted earnings management guided to for fiscal 2027—a multiple more typical of slower-growing legacy software companies than a business projecting 34% revenue growth. Whether that valuation is justified depends largely on whether OpenAI’s commitments convert into sustained cash flow and whether Oracle’s heaviest spending period is nearing its end.
Sources
- The Globe and Mail / Motley Fool — Oracle’s 52-week low, capital expenditure figures, free cash flow projections, debt levels, OpenAI concentration risk, and fiscal 2026 financial results
- Yahoo Finance / Investing.com — S&P downgrade details, debt figures, equity issuance plans, and cash flow projections
