Oracle is posting some of the strongest revenue growth in its history, yet its shares are trading within a whisker of a 52-week low and its credit rating is now just one notch above junk. The disconnect stems from a single strategic pivot: a debt-fuelled sprint to build artificial-intelligence infrastructure at a scale that has fundamentally recast a company long admired for its lavish cash generation.
The stock closed at €112.18 on Tuesday, a hair’s breadth above the day’s 52-week low of €111.58. Over the past month the shares have lost 32.5%, pulling the year-to-date decline to 32.8% and the 12-month loss to 44.6%. The 14-day relative-strength index has sunk to 25.4, a level that historically has preceded technical bounces, but the broader trend remains firmly negative: the stock is trading 28.6% below its 50-day moving average and 32.1% below its 200-day moving average.
Behind the rout is a balance-sheet transformation that has stunned even seasoned Oracle watchers. The company’s remaining performance obligations — contracts not yet recognised as revenue — have ballooned to $638 billion, fuelled largely by a partnership with OpenAI. That order book gives Oracle a visibility most rivals envy, but it also comes with an extraordinary cost. For the fiscal year ending in 2027, management plans capital expenditure of more than $90 billion, up from $55.7 billion in FY2026. To fund the build-out of AI data centres, Oracle is leaning heavily on borrowed money. Net debt stands at $97.6 billion, and total debt has reached $130 billion. The company intends to raise a further $40 billion in a mix of debt and equity for FY2027 alone.
The toll on free cash flow has been brutal. After generating $11.8 billion in free cash flow in FY2024, Oracle swung to a deficit of $23.7 billion in FY2026. Some analysts project the shortfall could widen to $42 billion in the current fiscal year, with the total net cash outflow reaching roughly $70 billion. S&P Global Ratings responded by downgrading Oracle to BBB-, the lowest rung of investment grade, drawing a line under a deterioration that the rating agency attributes to the mounting leverage and the concentrated nature of the company’s growth.
That concentration centres on OpenAI, which accounts for roughly half of Oracle’s AI-related backlog. A single customer dependency of this magnitude creates what the Bank for International Settlements recently flagged as a “circular financing” risk, where cloud providers and AI start‑ups are interlinked through long‑term leases and debt. Should OpenAI’s growth stall — the company is not expected to turn profitable before 2030 at the earliest — Oracle would be left with dedicated infrastructure that cannot easily be repurposed. The risk was underscored in July when Apple filed a lawsuit against OpenAI; Oracle’s shares fell more than 6% in a single session on concerns about the start‑up’s financial health.
Should investors sell immediately? Or is it worth buying Oracle?
Operationally, the business continues to fire on most cylinders. Fourth‑quarter revenue climbed 21% to $19.2 billion, with cloud revenue surging 47% to $9.9 billion. Full‑year sales reached $67 billion, up 17%, while operating cash flow rose 54% to $32 billion. Earnings per share for the quarter came in at $2.11, beating the consensus estimate of $1.96. Oracle also introduced a new AI‑native development environment for its Fusion Applications, designed to support “agentic” workflows, and maintained its quarterly dividend of $0.50. For FY2027 the company has guided for EPS of $8.05.
Yet the market is fixated on the balance‑sheet strain. The analyst community is deeply split. David Desjardins has issued a “Strong Sell” rating, warning of a potential “domino” effect if OpenAI fails to meet its commitments. The broader consensus, however, remains bullish: 28 analysts rate the stock a Buy against three Holds, with an average price target of €219.87 — implying nearly 96% upside from current levels. Individual targets range from Bernstein’s $325 to RBC’s $190, reflecting the wide uncertainty around the timing and magnitude of the AI infrastructure payoff.
History offers little comfort. In prior shocks of similar magnitude, Oracle shares have fallen an average of 18%, with the deepest drawdown — 40% — occurring during the 2008 financial crisis. The median recovery took four months, though one episode stretched to 27 months. An additional headwind came from IBM’s recent earnings miss, which triggered a sector‑wide rotation out of software stocks and into AI hardware, further depressing sentiment toward Oracle.
The reckoning has been costly for founder Larry Ellison, who has seen roughly $60 billion of his personal fortune evaporate, leaving him with an estimated $187 billion. With a market capitalisation of around €353.7 billion and an annualised 30‑day volatility of 48.4%, Oracle is now one of the most volatile mega‑cap tech stocks. The question hanging over the company is whether OpenAI can grow fast enough to fill the data centres Oracle is building before the interest burden on $97.6 billion of net debt becomes unsustainable. The coming quarters will provide the first real test of that equation.
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