S&P Cuts Oracle to BBB- as $95 Billion AI Spend Deepens OpenAI Risk

3 articles · Updated · heise online · Jul 13

S&P lowered Oracle to BBB- on July 9, leaving the company one notch above junk status while keeping its outlook stable.
A $90 billion to $95 billion AI infrastructure spending plan drove the cut, with S&P now forecasting nearly $42 billion in negative free operating cash flow in fiscal 2027.
OpenAI is a central credit risk because roughly half of Oracle's $638 billion in contracted but undelivered service volume is tied to the startup, whose payments depend on continued AI demand and funding.
Oracle's cloud infrastructure business made up about 27% of fiscal 2026 revenue and could approach 60% by 2028, but S&P says Oracle has less financial flexibility than Microsoft, Google or Amazon.
More than 21,000 job cuts over the past year underscore Oracle's shift toward capital-heavy AI expansion, a debt-fueled model regulators including the BIS have warned could echo past bubbles.

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Overview

Oracle is facing intense financial pressure after a July 2026 S&P downgrade, driven by its escalating debt, heavy cash burn, and a strategic shift toward equity dilution. The company’s massive commitment to long-term data center agreements with OpenAI has left it more vulnerable than competitors like AWS and Microsoft, especially given uncertainty around OpenAI’s ability to fulfill its contracts. This has triggered significant market volatility and bearish sentiment for Oracle’s stock, as investors worry about the risk of a further downgrade to junk status and Oracle’s reliance on a single customer for future growth.

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