Oracle’sstock chart looks like a horror movie right now, and the plot keeps getting scarier.
Shares of Oracle (ORCL) have fallen almost 50% from its September 2025 peak and are down 20% year-to-date.
The recent sell-off is driven by a credit downgrade, a spike in bond insurance costs, and growing doubts about whether Oracle’s massive artificial intelligence bet will pay off.
For a company that has spent decades as a steady, boring, profitable software business, that’s a big shift. And the numbers back up the worry.
Oracle bleeds cash amid AI spend
Oracle’s income statement still looks impressive on the surface.
Total revenue rose to $67.4 billion in fiscal 2026, up 17.3% year over year.
In Q4 of 2026, it reported revenue of $19.2 billion, up 21%, driven largely by cloud infrastructure revenue, which grew 93% year over year.
But look closer at the balance sheet, and the picture gets messier.
- Gross profit margin fell to 65.8% in fiscal 2026, down from 70.5% the year before and a steep drop from 80.6% back in 2021.
- Cost of sales jumped to $23 billion from $16.9 billion in just one year. That’s the cost of building out data centers at breakneck speed, and it’s eating into profitability even as sales climb.
- Net property, plant and equipment more than doubled, jumping from $56.7 billion to $129.6 billion in a single year.
- Long-term debt climbed from $85.3 billion to $122.3 billion.
- Lease obligations more than doubled too, rising from $11.5 billion to $26.6 billion.
Add it all up, and Oracle’s total liabilities ballooned from $147.4 billion to $218.7 billion in just twelve months.
Notably, Oracle’s free cash flow for fiscal 2026 came in at negative $23.7 billion.
That’s the gap between what Oracle earns from operations and what it’s investing into new data centers, chips and leases.
Credit agencies are nervous about ORCL stock
This is where the story turns from “aggressive growth” to “genuine risk.”
S&P Global Ratings downgraded Oracle’s long-term issuer credit rating to BBB- from BBB in July, and cut its short-term rating, according to the agency’s report.
That leaves Oracle just one notch above junk status.
Moody’s Ratings also holds a negative outlook on the company, meaning another downgrade is on the table.
S&P’s report explains it had underestimated the scale of investment Oracle’s AI buildout would require, and it now expects Oracle’s cloud infrastructure business, which made up 27% of revenue in fiscal 2026, to balloon to almost 60% of revenue by fiscal 2028.
S&P called that shift riskier than Oracle’s legacy software business because it requires significant upfront investment long before the payoff arrives.
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The agency also flagged Oracle’s exposure to OpenAI, which S&P estimates makes up roughly half of Oracle’s $638 billion order backlog.
If OpenAI ever struggled to pay its bills, S&P warned, Oracle could get stuck holding data center leases it can’t easily exit.
Further, Oracle’s five-year credit default swap spread, essentially the cost of insuring its bonds against default, climbed to around 219 basis points in late July.
That’s its highest level in years, and it signals bond investors are demanding a much bigger premium to hold Oracle debt.
Oracle executives aren’t blind to any of this. On the company’s fourth quarter earnings call, Chief Executive Clay Magouyrk addressed rising component costs directly, stating:
“So I don’t like it when costs go up. Our customers don’t like it when costs go up. And honestly, I don’t think our suppliers do.”
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Magouyrk explained that Oracle uses fixed-price contracts when it has cost certainty and floating price mechanisms when it doesn’t.
Chief Financial Officer Hilary Maxson, meanwhile, laid out the funding plan bluntly. “We expect to raise around $40 billion in debt and equity in our fiscal year ’27,” she said, adding that this figure already includes a previously announced $20 billion equity issuance.
What it means for ORCL stock investors
None of this means Oracle is headed for bankruptcy.
The company still projects a 31% revenue growth rate through fiscal 2030 and cites $638 billion in contracted future revenue as evidence that its bets will eventually pay off.
But the warning signs are real.
Rising debt, shrinking margins, a widening cash-flow deficit, and a credit rating one step above junk status are not small details.
They’re precisely the kind of red flags that turn a growth story into a cautionary tale if the AI spending boom slows down even slightly.
Investors chasing Oracle’s AI momentum should keep one eye on the balance sheet, not just the revenue headline.
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