Oracle's $40 Billion Bet: Can the AI Spending Spree Outrun the Debt Clock?
Published on 08/11/2026 at 13:41 | Redaktion boerse-global.de
The numbers arriving from Oracle over the past week paint a picture of a company pulling in opposite directions at once. Within a 48-hour window in early August, three institutional investors filed mandatory disclosures that could hardly have been more divergent: Franklin Street Advisors slashed its stake by 19.7 percent, leaving just 161,489 shares in its portfolio, while Wealth Science Advisors expanded its position by a staggering 677.6 percent over the same stretch. Avity Investment Management landed somewhere in between, boosting its holdings by 231.8 percent after purchasing 127,037 additional shares for roughly $26.65 million.
That institutional schizophrenia is the defining feature of the Oracle story right now. The software giant has thrown itself headlong into the hyperscaler arms race for AI infrastructure, guiding capital expenditures as high as $95 billion for the current fiscal year. The payoff is visible in the top line — fourth-quarter revenue climbed 20.6 percent to $19.18 billion, with earnings per share beating expectations. But the bill for that expansion is coming due in ways that have credit rating agencies on edge.
A Balance Sheet Under the Microscope
Moody's, Fitch, and S&P Global have all flagged concerns that Oracle's debt-to-EBITDA ratio is climbing to uncomfortable levels. S&P took the most concrete step in July, downgrading the company to BBB- — just one notch above junk status — citing an adjusted leverage of more than four times earnings that shows no signs of normalizing anytime soon.
The market's response has been telling. Since that downgrade, the stock has recovered roughly 4.5 percent in Frankfurt trading, a sign that investors are weighing the growth narrative more heavily than the balance-sheet risk. That resilience hasn't gone unnoticed, but neither has the scale of what Oracle is attempting.
The company confirmed plans to raise around $40 billion in fresh capital during fiscal 2027, combining debt issuance with an already-announced $20 billion "at-the-market" equity program. That financing push comes alongside a sobering disclosure from June: negative free cash flow of $23.7 billion for fiscal 2026, a figure that underscores just how capital-intensive this cloud buildout has become.
Cost-Cutting as Counterweight
Oracle is simultaneously trying to offset that spending discipline elsewhere. The company confirmed a worldwide workforce reduction of roughly 21,000 employees — about 13 percent of its headcount — during fiscal 2026, explicitly attributing the cuts to AI adoption within its own operations. It's a move that reads as an attempt to keep the core business lean while billions pour into data centers and GPU capacity.
Not everyone on the inside has been projecting unqualified confidence. Vice Chairman Jeffrey Henley sold 400,000 shares on June 24 through a pre-arranged Rule 10b5-1 trading plan at an average price of $159.16, cutting his direct stake in half. Because the sale ran through an automated plan, it doesn't constitute an acute warning signal — but the timing, sandwiched between cash-flow concerns and the S&P downgrade, is hard to ignore entirely.
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Analysts Hold the Line, With Caveats
UBS analyst Karl Keirstead trimmed his price target on Oracle from $285 to $245 on Thursday while maintaining a "Buy" rating. His reasoning sits squarely at the heart of the tension: rising costs for AI infrastructure and a tightening credit market are clouding the picture, but they don't undermine the fundamental growth trajectory.
The same day brought a reminder of why that growth story remains intact. The U.S. Office of Personnel Management selected Oracle as the core technology partner for a ten-year, roughly $400 million modernization project for the federal civilian workforce, working alongside CACI, Deloitte, and Baker Tilly. Earlier in the week, Oracle Health expanded its services to hospitals in Ontario, and late July saw the company and Google Cloud announce the integration of Google's Gemini models directly into Oracle Fusion Applications and the Oracle AI Agent Studio, enabling enterprise customers to build custom AI workflows. The stock jumped more than 9 percent between July 30 and August 3 in response.
The Verdict Awaits September 8
Oracle reaffirmed its fiscal 2027 revenue guidance of $90 billion on Saturday while raising its earnings-per-share forecast to $8.05. The stock closed Monday at €131.10 in Frankfurt, up 3.15 percent on the day, and has gained 13.06 percent over the past 30 days — though it still sits 14.02 percent below its 200-day moving average and roughly 55 percent off its September peak.
That gap between short-term recovery and long-term skepticism captures the current predicament. The next test arrives September 8, when Oracle reports fiscal first-quarter results. Analysts are looking for revenue around $19.12 billion and earnings per share of $1.67. Those numbers will go a long way toward determining whether the billions plowed into data centers and AI partnerships deliver the momentum needed to justify the mounting debt — or whether the rating agencies' warnings prove to be more than background noise in an ambitious growth story.
