Oracle shares struggle as investors question debt load

Oracle just posted what might be its most impressive growth numbers in years. Investors rewarded the company by sending its stock down 12%.

Oracle’s fiscal year 2026 results, released June 10, revealed a business sprinting toward AI infrastructure dominance while simultaneously taking on a debt load that has credit agencies reaching for the warning labels.

The numbers tell two very different stories

Oracle’s remaining performance obligations hit $638 billion as of May 31, 2026, a 363% increase year-over-year, driven almost entirely by large-scale AI cloud contracts. Cloud infrastructure revenue grew 93% year-over-year in Q4 FY2026 alone.

Oracle’s capital expenditures for the fiscal year came in at $55.66 billion, overshooting its own $50 billion target, and produced a negative free cash flow of $23.7 billion for the year. Total debt stood at $129.5 billion as of May 31. Management signaled it plans to raise approximately $40 billion more in debt and equity during fiscal year 2027 to fund continued AI infrastructure buildout.

Oracle shares dropped as much as 12% on June 11, the day after results were released.

S&P’s downgrade added fuel to an already nervous room

In July 2026, S&P Global downgraded Oracle’s credit rating to BBB-, the last rung before junk territory. A downgrade at this level raises borrowing costs, tightens the company’s access to cheap capital, and signals that at least one major ratings agency sees leverage as a structural concern rather than a temporary growth-phase inconvenience.

During FY2026, Oracle raised $43 billion in senior notes and $5 billion in mandatory convertible preferred stock to fund its expansion. The convertible preferred stock converts into common shares under certain conditions, meaning existing shareholders face potential dilution on top of an already leveraged balance sheet.

The bull case is real, but it requires patience the market isn’t offering

Oracle’s defenders point to the $638 billion RPO figure as the key variable. Amazon, Microsoft, and Google all went through phases where capital expenditure dramatically outpaced near-term cash flow as they scaled cloud infrastructure.

Investors need confidence that backlog conversion will accelerate fast enough to service a $129.5 billion debt pile before credit conditions tighten further, and that the additional $40 billion in planned FY2027 raises won’t dilute shares so heavily that equity holders end up funding a growth story they can barely participate in.

Oracle’s Q1 FY2027 earnings release is expected around September 10-14, 2026. Revenue growth trajectory, backlog conversion rates, and management’s commentary on financing strategy will all be closely watched. If free cash flow remains deeply negative while debt climbs further, the BBB- rating may not hold for long.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.