Oracle's $638 Billion AI Backlog Creates a Funding Paradox as Credit Rating Slides
Published on 07/11/2026 at 05:01 | Redaktion boerse-global.de
Oracle’s cloud business is booming at a pace that would make most tech giants jealous, yet the company’s stock sits more than 50% below its peak and its credit rating has just slipped to within one notch of junk. The disconnect comes down to a single, brutal math problem: building the infrastructure to service that demand costs far more — and far faster — than the revenue is arriving.
The company plans to raise up to $40 billion in the fiscal year 2027 through a mix of debt and equity, including a potential $20 billion share sale that analysts estimate could dilute existing holders by as much as 4.8%. That capital call follows a fiscal 2026 in which Oracle spent roughly $56 billion on infrastructure — a 162% surge from the prior year — and still posted a negative free cash flow of $23.7 billion. With total debt standing at $167.4 billion as of May 31, the balance sheet is straining under the weight of its own ambition.
Rating Cut and Regulatory Scrutiny
S&P Global Ratings responded on July 10 by downgrading Oracle’s long-term credit rating from BBB to BBB-, the last rung of investment grade. The agency cited rising business risk, heavy leverage, and uncertainty around the near-term profitability of the AI buildout, and it expects net debt to EBITDA to remain above 4 times for at least two more years.
The same week brought a separate layer of oversight from London. The UK Treasury officially designated Oracle Corporation UK Ltd as a “Critical Third Party” for the British financial system, placing it alongside three other major cloud providers under direct supervision by the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority starting July 13, 2026. Oracle will now have to run regular resilience tests and report incidents — a permanent compliance burden that adds cost and complexity to a company already struggling to fund its growth.
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Technicals Signal Oversold, But Volatility Remains High
The stock closed the week at €123.28, down 2.34% on Friday and 2.39% for the week. The 30-day loss stands at nearly 30%, and the 12-month slide has reached 38.65%. Friday’s decline was partly mechanical: Oracle went ex-dividend on July 10 for its quarterly payout of $0.50.
At current levels, Oracle trades 56.08% below its 52-week high of €280.70 set in September 2025, yet sits only 8.27% above its 52-week low of €113.86 from February. The 14-day RSI is hovering around 31, deep in oversold territory. Historically, such readings often precede a consolidation or technical bounce, but with 30-day annualized volatility at 47.95%, the market remains deeply skittish. The stock also remains well below its 200-day moving average of €166.26.
Operationally Strong, Financially Stretched
Behind the credit angst, the business itself is firing on all cylinders. Oracle’s remaining performance obligations — the backlog of contracted future revenue — hit $638 billion in the latest quarter, a 363% year-over-year jump. Cloud infrastructure revenue alone grew 93%, and the company recently launched “AI Agent Memory 26.6,” a storage management tool designed to compete with Microsoft and Amazon on enterprise AI workloads.
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That operational strength is why some analysts remain bullish despite the downgrade. Bernstein reaffirmed its buy rating with a $325 price target — implying upside of more than 132% from current levels. But the rating cut and the dilution risk from the capital raise have created a deep valuation schism. One camp sees a once-in-a-generation backlog that will eventually translate into mountainous cash flow; the other sees a company that is borrowing and issuing shares at an unsustainable pace to finance infrastructure that may take years to pay off.
For now, Oracle is caught between a technological leadership story and a hard financing reality. The next few quarters will determine whether the backlog becomes a cash-flow bridge or a credibility gap that keeps the stock in the penalty box.
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