The Credit Markets Are Sending Oracle a Warning That Its Earnings Can't Silence
Published on 07/29/2026 at 13:12 | Redaktion boerse-global.de
Oracle finds itself caught in an increasingly uncomfortable tug-of-war. The company's operating numbers tell a story of explosive cloud growth and a record order book, yet its stock closed Tuesday at €105.50 — barely 4.7% above its 52-week low and down more than half its value over the past twelve months. The disconnect isn't a market glitch; it's a fundamental reassessment of how much leverage the company can safely carry.
Debt Costs Are Rising Faster Than Revenue
The most telling signal isn't coming from equity analysts but from the credit derivatives market. The cost of insuring Oracle's debt against default has hit a record 212 basis points, according to Whalesbook analyst Riya Kapoor. That spike reflects a debt-to-equity ratio of 3.21 — a level that explains why rating agencies have already downgraded the company's creditworthiness.
The broader market for AI-related bonds is showing cracks. BlackRock recently had to offer a 7.53% yield on a $12.5 billion bond financing a Meta data center in Texas, and the deal was only 1.6 times oversubscribed — the weakest demand ever recorded for a large AI bond issuance. Fitch has warned that a correction in the AI market would pose a significant credit risk, naming Oracle alongside Amazon, Alphabet, Nvidia, Meta and SpaceX as issuers in the $182 billion wave of recent AI-linked bonds. Moody's has also flagged concerns.
This isn't an Oracle-specific problem, but the company feels it more acutely. Goldman Sachs projects that the big hyperscalers will fund roughly 35% of their AI investments through debt by 2027, up from 26% in 2025. Oracle's already elevated leverage makes it the most exposed player in that trend.
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A Single Customer Concentrates the Risk
The second fault line runs through Oracle's customer book. S&P Global recently identified the company's dependence on one highly unprofitable AI startup partner as a central credit risk. A significant chunk of Oracle's contracted future revenue is tied to that single client. If that startup fails to secure external financing, Oracle would be left with expensive, underutilized infrastructure. The $638 billion backlog — up 363% — looks less bulletproof when a large portion depends on one customer's ability to keep raising capital.
That concentration risk helps explain the 18.6% decline in Oracle's stock over the past 30 days. The market is pricing in the possibility that the AI boom cools or that financing dries up, stranding the company's investments.
The Operating Picture Is Genuinely Strong
None of this negates the underlying business performance. In the fourth quarter of fiscal 2026, Oracle's revenue rose 17% to $67.4 billion, with cloud revenue jumping 39% to $34 billion. The company has guided for $90 billion in revenue in fiscal 2027 and adjusted earnings per share of $8.05. The backlog of $638 billion — a 363% surge — has many analysts pointing to real demand for Oracle's AI infrastructure.
One analyst at Ainvest calls the stock a "conditional bargain" at a forward price-to-earnings ratio of roughly 15.5, a discount to the broader U.S. market. The consensus among analysts remains a "Moderate Buy" with an average price target just above $265. Mizuho's analysts see potential for a doubling of the stock price.
Institutional Skepticism Is Creeping In
Yet hedge funds are showing caution. Night View Capital reduced its Oracle position in the second quarter, according to Insider Monkey, even after the cloud numbers had posted strong gains. While 115 hedge funds held Oracle shares at the end of the first quarter — up from the start of the year — the trimming of positions by some prominent funds suggests that institutional investors are weighing the credit risks more heavily.
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Technicals Offer No Comfort
The chart tells its own story. Oracle's stock trades 33% below its 200-day moving average of €157.60, confirming a sustained downtrend. The 14-day relative strength index of 33.2 points to oversold conditions, but that alone doesn't signal a bottom. The annualized 30-day volatility of 47.27% suggests more turbulence ahead. For investors who bought at the all-time high of €280.70, the 62.4% decline has made the quarterly dividend of $0.50 per share a cold comfort.
The bull case rests on the assumption that Oracle's massive infrastructure buildout will eventually generate high returns on capital. The immediate reality is credit downgrades, negative free cash flow, and rising financing costs. Until the company can demonstrate that its investments are producing sustainable cash flows rather than just a growing backlog, the tension between strong operations and mounting debt concerns is unlikely to resolve.
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