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S&P downgrades Oracle to BBB – only one notch above junk level

heise.de

July 14, 2026

3 min read

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61/100

Summary

S&P Global has downgraded Oracle's credit rating from BBB to BBB-, placing it one notch above junk status. The downgrade is attributed to the company's significant investments in AI, although S&P maintains a stable outlook for Oracle.

Key Takeaways

S&P Global downgraded Oracle's credit rating from BBB to BBB-, placing it just one notch above junk status due to significant AI investments increasing debt and capital requirements.
Oracle is projected to face a free operating cash flow deficit of nearly $42 billion for the 2027 fiscal year, with spending forecasts raised to $90-95 billion.
S&P identifies Oracle's reliance on OpenAI as a critical credit risk, with approximately half of the unfulfilled service volume of $638 billion linked to OpenAI.
Oracle is transitioning from a software company to a cloud infrastructure provider, with expectations that this segment will grow from 27% to nearly 60% of total revenue by 2028.

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Community Sentiment

Negative

Positives

Amazon and Google owning their hardware gives them a competitive edge, enabling vertical integration that could keep them profitable as AI prices plummet.

Concerns

The consensus is that all AI models are converging, making them commodities with diminishing returns, which raises serious concerns about the future of AI investments.
Market signals indicate a potential AI bust as ROI expectations rise, threatening the sustainability of AI-only companies without diversified income.
Oracle's cloud service experience was a disaster, with sign-up issues that clearly show their priorities are misaligned — a red flag for potential users.