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S&P cuts Oracle to BBB-, one notch above junk, on a $42B cash-flow deficit

S&P cuts Oracle to BBB-, one notch above junk, on a $42B cash-flow deficit

S&P cut Oracle one notch to BBB-, its last rung above speculative grade, projecting a $42B free-cash-flow deficit in fiscal 2027 — nearly double its prior estimate — as AI data-center capex climbs to $90-95B. The downgrade prices structural risk, not a cycle: OpenAI is roughly half of Oracle's booked obligations, and against $167B in debt the company is leaning on tens of billions in equity dilution to hold its investment-grade rating. Oracle shares still rose 2.7%, with investors weighting the $638B cloud backlog over the balance sheet.

Source: finance.yahoo.com ↗

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Oracle's fiscal 2027 free operating cash flow deficit is expected to widen to a staggering negative $42 billion, nearly double the prior projection of a $24 billion deficit.

S&P Global Ratings

Why this matters

  • → Oracle faces $42B annual cash deficit by 2027, straining ability to service $167B debt load.
  • → OpenAI represents ~50% of booked obligations; concentration risk amplifies if AI sector falters.
  • → Equity dilution (tens of billions planned) signals balance-sheet stress despite market optimism.
Infrastructure bet, debt risk