Big tech companies are pouring massive amounts of money into artificial intelligence (AI) buildouts. The capex spending on AI is expected to be a whopping $1 trillion this year. Building data centers also carries the cost of increased power requirements. Tech giant Oracle Corporation (ORCL) is also a big part of this race.
The company might have to incur $7 billion in financial guarantees for its planned Wisconsin data center. Regulators have reportedly declined to ease credit requirements to protect the state’s residents from rising power costs. The planned data center is part of Oracle’s $300 billion computing infrastructure agreement with OpenAI to deliver nearly one gigawatt of computing capacity.
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Amid regulatory risks, S&P Global has downgraded Oracle’s credit rating from BBB to BBB- (just one step above junk), citing the firm’s exposure to OpenAI and its high infrastructure spending, which could prevent the company from meeting its debt obligations.
In fact, Oracle is facing increased risk from a heightened debt load due to its large spending on AI. According to data from ICE Data Services, the annual cost of five-year credit default swaps on Oracle’s debt recently rose to about 2.03 percentage points, its highest level since 2008.
About Oracle Stock
Oracle is a global technology company specializing in enterprise software, cloud computing, and database management systems. Recently, it has focused heavily on expanding its cloud infrastructure offerings, particularly in AI and enterprise cloud services, while continuing to integrate acquisitions to strengthen its technology portfolio.
The company provides a comprehensive suite of applications and platform services to businesses worldwide. Oracle's world headquarters is located in Austin, Texas. It has a market capitalization of $365.96 billion.
Oracle’s stock has been under pressure over the past year, primarily due to concerns about its heavy debt load and aggressive capital spending tied to its artificial-intelligence infrastructure build‑out. After a strong 2025 rally driven by AI enthusiasm and a massive OpenAI cloud deal, investors grew wary of these factors.
Over the past 52 weeks, Oracle’s stock has dropped 46.89%, while it is down 35.12% year-to-date (YTD). The company’s shares reached a 52-week low of $120.03 on July 20, but are up 4.5% from that level. Over the past month, the stock has dropped 27.8%.
www.barchart.com Oracle’s 14-day RSI of 32.72 is very close to the oversold territory. On a forward-adjusted basis, its price-to-earnings (non-GAAP) ratio of 15.78 times is lower than the industry average of 24.49 times.
Oracle Posted Record Q4 Cloud Growth, but Spending and Cash Concerns Weigh on Shares
For the fourth quarter of fiscal 2026 (quarter ended May 31), Oracle reported record revenue of $19.18 billion, up 21% year-over-year (YOY), which was higher than the $19.08 billion that Wall Street analysts had expected. This was based on cloud revenue climbing 47% YOY to a record $9.91 billion. Its non-GAAP EPS increased by 24% from the prior-year period to $2.11, surpassing the $1.96 expected by analysts. The company’s RPO was $638 billion at the end of Q4.
However, Oracle’s stock dropped 8.53% intraday on June 11 after the results because investors focused on its cash burn. Its free cash flow for Q4 was -$23.69 billion. There’s also concern about its debt load. In fiscal year 2026, Oracle secured $43 billion in debt funding and $5 billion in equity financing. For fiscal year 2027, it plans to raise about $40 billion through a mix of debt and equity, including the $20 billion at-the-market equity offering it had already announced.
Wall Street analysts expect Oracle’s EPS to grow 2.5% YOY to $6.47 in fiscal 2027, followed by a 35.7% growth to $8.78 in fiscal 2028.
What Do Analysts Think About Oracle’s Stock?
This month, analysts at CLSA initiated coverage of Oracle’s stock with a “Hold” rating and a $145 price target. The firm cited concerns about the company’s debt-fueled AI expansion. CLSA analysts also estimate that Oracle may need up to $500 billion in capital to meet management’s goals through 2030, but internal cash generation can provide only one-fifth of that amount.
Despite the credit-rating downgrade, Bernstein’s analyst Mark L. Moerdler reaffirmed his “Buy” rating on Oracle shares, while keeping a $325 price target. Moerdler pointed out that the capacity Oracle needs to meet all of its current contracts is already included in lease capacity currently being built by third parties.
Last month, Barclays raised Oracle’s price target to $250 from $240 and kept an “Overweight” rating on the shares following the fiscal Q4 report. The analyst told investors in a research note that the company deserved some credit for reporting another quarter of solid results.
Oracle has been in the spotlight on Wall Street for some time now, with analysts awarding it a consensus “Strong Buy” rating overall. Of the 44 analysts rating the stock, a majority of 33 analysts have rated it a “Strong Buy,” one analyst suggests a “Moderate Buy,” nine analysts are playing it safe with a “Hold” rating, and only one analyst gave a “Strong Sell” rating. The consensus price target of $252.09 represents a 100.3% upside from current levels. Moreover, the Street-high price target of $400 indicates a 217.8% upside.
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www.barchart.com On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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