Oracle's $117 Billion Bond Pile and $42 Billion Cash Deficit Overshadow a Record Backlog
Published on 07/18/2026 at 16:12 | Redaktion boerse-global.de
The divergence between Oracle's booming order book and its deteriorating finances has never been starker. Credit markets are now pricing in risks that equity investors have been slow to fully acknowledge. The cost to insure Oracle's debt against default hit a record 198.23 basis points on Friday, underscoring a growing unease that has already triggered a downgrade from S&P Global Ratings to BBB- — just one notch above junk.
The catalyst was Oracle's disclosure in its annual report that it plans to spend between $90 billion and $95 billion on infrastructure in fiscal 2027, far exceeding earlier estimates of $60 billion. That capital-intensive bet on AI data centers has left a deep hole in the company's cash flow. Over the past twelve months, free cash flow was negative $24 billion on capital expenditures of $56 billion. Looking ahead, management projects a free cash flow deficit of roughly $42 billion for the upcoming fiscal year, forcing Oracle to tap debt markets aggressively. The company has become one of the largest non-financial corporate bond issuers, with $117 billion in outstanding notes.
To bridge that gap, Oracle has already lined up additional financing, including a reported $14 billion data center package with PIMCO. A planned $40 billion capital raise is also on the table, though it risks further pressure on the credit rating if the borrowing environment tightens. The company's leverage is testing investor patience, even as its backlog swells to a staggering $638 billion in remaining performance obligations — a 363% surge year-over-year. Cloud infrastructure revenue jumped 93% in the June quarter and now accounts for 52% of total sales.
But that backlog comes with a glaring concentration risk. OpenAI alone represents roughly half of Oracle's contracted future revenue. S&P flagged that a default by the AI startup could leave Oracle on the hook for massive, non-cancellable data center leases. This vulnerability, combined with the negative cash flow, prompted the rating downgrade in early July.
Should investors sell immediately? Or is it worth buying Oracle?
Management has responded by slimming the legacy business. Oracle eliminated 21,000 positions over the past fiscal year, a 13% reduction in headcount. Analysts view the cuts not as routine cost discipline but as a full-scale restructuring — shrinking the traditional software footprint to double down on the AI infrastructure pivot.
On the chart, the stock looks beaten down. After hitting a fresh 52-week low of €105.10 on Friday, shares closed at €110.56, up 1.79% but still down 31% in the last 30 days and 60.61% below the September 2025 peak of €280.70. The 14-day relative strength index sits at 29.0, deep in oversold territory. Oracle trades 28% below its 50-day moving average and more than 32% below the 200-day line. Annualized 30-day volatility has spiked above 47%, reflecting the whipsaw between AI euphoria and credit anxiety.
Wall Street remains deeply split. Guggenheim's John DiFucci holds a $400 price target and calls Oracle his best software idea for 2026, dismissing the sell-off as overdone. The average analyst target of €220.24 implies nearly 100% upside from current levels. But that optimism hinges on sustained cloud infrastructure margins of 30% to 40%, GPU utilization near 97.5%, and no further credit downgrades. Meanwhile, the emergence of competing AI models such as Moonshot AI's Kimi K3 is raising questions about whether Oracle's cloud partners can maintain their technological edge — just as construction costs for those very data centers peak.
Oracle at a turning point? This analysis reveals what investors need to know now.
For now, Oracle's bull case rests on a record backlog and reaffirmed revenue guidance of $90 billion and non-GAAP EPS of $8.05 for fiscal 2027. The bear case counters that a negative cash flow, rising debt, and a shrinking workforce signal the AI gamble is straining the balance sheet faster than orders convert into cash. With the stock trading just above its annual low, the next few sessions will test whether €105 holds as a floor or gives way to further declines.
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