Oracle is facing significant financial pressure as it expands its AI data center infrastructure. In September 2025, the company issued $18 billion in bonds, supported by a $300 billion cloud contract with OpenAI. Total financing needs for projects in Texas, Wisconsin, and New Mexico are estimated at up to $56 billion, with plans to raise over $40 billion in additional debt and equity this fiscal year.
By late 2025, Oracle's net debt is projected to exceed $105 billion. Capital expenditure for fiscal year 2026 is expected to surpass $55 billion, leading to a negative free cash flow of approximately $24 billion. In July 2026, S&P downgraded Oracle’s credit rating to BBB-, one notch above junk status, while credit default swaps reached 2.03%.
Bondholders have initiated lawsuits against Oracle, claiming the company failed to disclose the full extent of its financing requirements during the September 2025 bond issuance. Additionally, local community opposition and regulatory challenges in states like New Mexico have caused project delays and forced shifts toward renewable energy, further increasing costs and construction timelines.
The company's aggressive borrowing strategy, which exceeds that of peers like Microsoft and Alphabet, now faces a challenging credit environment. With a BBB- rating and rising borrowing costs, Oracle must maintain its capital structure while waiting for revenue from the OpenAI contract to materialize, as future debt issuances will likely carry higher interest rates.
