Oracle's Growth Story Is Now a Balance-Sheet Story — and the Market Is Repricing It in Real Time
Published on 08/17/2026 at 18:11 | Redaktion boerse-global.de
The most telling signal about Oracle's current predicament didn't come from the equity market at all. It came from the credit market. When S&P Global Ratings lowered the company's long-term issuer rating from BBB to BBB- in July — with a corresponding cut to its short-term rating — the message was unambiguous: Oracle now sits just one notch above junk status. Moody's, meanwhile, maintains a negative outlook, leaving the door open for further downgrades.
The stock's reaction on Friday said the rest. Shares fell 4.1 percent to EUR 129.90, slipping back toward the 50-day moving average of EUR 130.74 and erasing much of the recovery built over the previous month. On Monday, the shares continued lower, trading at EUR 127.30, down another 2.0 percent.
A Business Growing on Borrowed Money
The downgrade matters because Oracle's entire AI expansion is being financed with debt — at a scale that stands out even among hyperscalers. The company's free cash flow for fiscal 2026 came in at negative USD 23.7 billion, a gaping hole between what operations generate and what's being poured into data centers, chips, and lease commitments.
The balance sheet tells the same story from every angle. Property, plant, and equipment more than doubled in a single year, from USD 56.7 billion to USD 129.6 billion. Long-term debt climbed from USD 85.3 billion to USD 122.3 billion over the same period. Lease obligations more than doubled as well, pushing total liabilities from USD 147.4 billion to USD 218.7 billion — all within twelve months.
Reuters reported in early August that Oracle has signed roughly USD 260 billion in data center lease commitments. Around the same time, Yahoo Finance reported that the company is planning a new round of layoffs in August, even as it raises tens of billions in debt to fund its AI infrastructure buildout. Management has reportedly been instructed to identify affected employees before the start of the second fiscal quarter on September 1.
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The Ratings Agencies Admit They Were Behind the Curve
What's striking about the S&P downgrade isn't just the rating itself — it's the admission that came with it. The agency openly acknowledged underestimating the scale of Oracle's AI-related investments. S&P now expects Oracle's cloud infrastructure unit, which accounted for 27 percent of revenue in fiscal 2026, to grow to nearly 60 percent of sales by fiscal 2028.
That's a remarkable confession from a ratings agency: it's effectively repricing Oracle in real time, and the direction is consistently downward. The company is delivering spectacular revenue growth, but its credit profile is deteriorating at nearly the same pace. Rivals like Microsoft and Amazon are funding their AI buildouts largely from existing cash flows. Oracle, by contrast, is spending at hyperscaler speed without the hyperscaler balance sheet to match.
A Stock Caught Between Two Narratives
The market data reflects this tension. Oracle shares sit 57 percent below their 52-week high of EUR 294.85, reached last September. The stock is down 40 percent year over year and 23 percent year to date. Yet it still trades 26 percent above the 52-week low of EUR 100.76, set in late July — suggesting at least part of the selloff may already be behind it.
Technically, the stock looks oversold but not broken. The RSI sits at 55.3, neutral territory with no capitulation signal. The annualized 30-day volatility of 62 percent, however, tells the real story: the market simply doesn't know how to price this risk.
The disconnect between Wall Street's consensus price target of EUR 247.17 — implying roughly 64.5 percent upside — and what investors are actually willing to pay is itself a symptom. It captures the widening gap between the AI growth narrative and the credit reality now weighing on the stock.
The News Flow Keeps Coming, the Stock Keeps Falling
None of this is for lack of positive headlines. Last Thursday, Oracle expanded its partnership with Amazon Web Services, introducing Oracle AI Database@AWS as a concrete product aimed at accelerating customer migrations. A day earlier, the company unveiled a wave of AI and database updates, from EBCDIC compatibility in Oracle AI Database 26ai to the integration of NVIDIA Nemotron 3.5 Lightning into OCI Enterprise AI.
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On August 11, Oracle announced a multi-year partnership with Quantinuum, whose Helios quantum computer will be available through Oracle Cloud Infrastructure. And on July 23, the company secured a ten-year contract with the US Department of Defense worth USD 3.31 billion in base volume for the first five years, with a potential total of USD 6.99 billion if all options are exercised.
Analysts have responded with cautious adjustments. JPMorgan cut its price target on Monday from USD 210 to USD 200, while maintaining an Overweight rating. UBS had already trimmed its target from USD 285 to USD 245 on August 6, also keeping a Buy rating. Both firms still see upside — but their expectations are clearly moving in the wrong direction.
The Real Question Is No Longer Growth
With a market capitalization of roughly EUR 374.82 billion, Oracle still commands genuine optimism about its cloud trajectory. But the credit rating trajectory has arguably become the more important metric. A company can convince skeptical equity investors with growth. It's considerably harder to convince a ratings agency that has already admitted to underestimating the capital intensity of the bet — and that is watching debt rise faster than cash flow can catch up.
Oracle is proving it can compete in the AI infrastructure game, with deals involving AWS, Quantinuum, and the Pentagon that are far from trivial. But the financing of that growth — through mounting debt and simultaneous job cuts — raises real questions about sustainability. The next chapters of this story may be written less in cloud bookings and more in credit spreads.
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