Oracle shares are clawing back from the brink, trading at €105.30 on Wednesday after touching a 52-week low of €100.76 just a day earlier. The 2.23% bounce feels more like a reflexive relief rally than a conviction-driven turnaround, given the wreckage of the past year. Since hitting an all-time high of €280.70 in September, the stock has shed more than 60% of its value. Over the last 30 days alone, it has fallen nearly 18%, and the year-to-date decline stands at over 36%.
The sell-off has pushed the relative strength index to 34.7, a level that typically signals oversold conditions and hints that the selling pressure may have gone too far in the near term. But technical indicators offer little comfort when the underlying story is one of escalating debt, a cratered free cash flow, and a credit rating that now sits just one notch above junk.
The catalyst for the latest leg down came on July 9, when S&P Global Ratings downgraded Oracle’s long-term issuer rating from BBB to BBB-. The agency cited rising business risk and a materially weaker free operating cash flow, driven by the company’s aggressive expansion into AI infrastructure. S&P expects Oracle’s adjusted leverage to remain above four times earnings for at least the next two years, as capital spending outpaces the company’s ability to generate cash internally.
That spending is staggering. In fiscal 2026, Oracle’s capital expenditures hit $55.7 billion — more than double the $21.2 billion spent the prior year. The bulk of that outlay is going into AI data centers and high-performance computing clusters. The result: despite a 54% rise in operating cash flow to $32.0 billion, free cash flow swung to negative $23.7 billion. A company that was once a reliable cash machine is now burning through capital at a rate that demands constant external financing.
To plug the hole, Oracle raised $43 billion in new debt during fiscal 2026. For fiscal 2027, management has penciled in another $40 billion in capital needs, including a $20 billion at-the-market equity program approved in February and executed through Citigroup. If the stock recovers, shareholders face dilution. If it doesn’t, the financing becomes even more expensive.
The downgrade from S&P crystallized what bond investors had already been pricing in. The rating agency’s move was a direct acknowledgment that Oracle’s traditionally stable business risk profile is being eroded by the sheer scale and uncertainty of its AI bet. The stable outlook attached to the new rating offers little reassurance; it simply means S&P doesn’t expect another downgrade in the near term, not that the risks are receding.
Should investors sell immediately? Or is it worth buying Oracle?
Analysts on the equity side remain far more optimistic. The majority on Wall Street still rate Oracle a strong buy, with an average price target more than double the current share price. That gap between market reality and analyst expectations has widened in recent days, as the stock set new lows on July 24, 25, and 28. The disconnect raises a question: is the market being too pessimistic, or are the analysts ignoring the balance sheet?
The bull case rests on a record $638 billion backlog, roughly half of which comes from a single customer: OpenAI. That concentration is both a strength and a vulnerability. If OpenAI’s funding or demand shifts, Oracle could be left with massive, underutilized capacity. The mismatch in contract durations adds another layer of risk. Oracle has locked itself into 15- to 19-year commitments on data center and energy contracts, while the largest AI compute deals — including the OpenAI arrangement — reportedly run for only five years. That means Oracle is on the hook for long-term costs backed by revenue that isn’t secured beyond the initial contract term.
Revenue growth is real, however. Fiscal 2026 sales rose 17% to $67.4 billion. The cloud infrastructure segment grew 77% for the full year and 93% in the fourth quarter alone, reaching $5.8 billion. The optimists argue that this trajectory justifies the spending, and that the backlog will eventually convert into cash flow. The skeptics counter that the interest rate environment could upend that calculus. If new Federal Reserve Chair Kevin Warsh raises rates, Oracle’s already heavy debt load becomes even more expensive, potentially slowing the data center buildout and delaying the conversion of backlog into revenue.
On the product side, Oracle continues to churn out updates. On July 29, it launched the Application Security Idea Lab for SaaS cloud customers, a platform that lets clients co-develop security controls against AI-driven threats. That followed the July 21 security update, the largest in company history, with 1,449 patches across 334 products. These moves show that the software engine is still running, but they have done little to calm fears about creditworthiness and cash burn.
The technical picture offers a mixed signal. The RSI sits at 31.5, nearing oversold territory, while the stock trades nearly 29% below its 50-day moving average of €144.75. That gap underscores the violence of the recent sell-off. Whether the €100.76 level holds as a floor will likely be determined in the coming sessions, but the bigger question is whether Oracle can bridge the chasm between its AI ambitions and its balance sheet constraints before the market forces a reckoning. The next quarterly results, due in September, will provide an early test of whether the cloud growth story can outweigh the debt and cash-flow concerns.
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