S&P downgrades Oracle to BBB-, one notch above junk
Rating agency cites AI infrastructure investments as increasing debt burden
1Credit rating downgrade
S&P Global downgraded Oracle's credit rating from BBB to BBB-, the lowest investment-grade level. One more downgrade would push the company into speculative territory. However, S&P maintained a stable outlook for the database giant.
2AI investments pressure finances
The rating agency attributed the downgrade to Oracle's massive investments in AI data centers. S&P forecasts a $42B free cash flow deficit for fiscal 2027, which Oracle plans to finance through a mix of debt and equity offerings.
3OpenAI dependency risk
S&P views Oracle's heavy reliance on OpenAI as a critical risk, with half of its $638B in committed but undelivered service volume tied to the AI firm. This creates substantial credit exposure if OpenAI faces payment difficulties.
4Transformation to hyperscaler
Oracle is shifting from software to cloud infrastructure, which accounted for 27% of 2026 revenue and may reach 60% by 2028. However, S&P considers Oracle weaker than rivals like Microsoft and Amazon in financial flexibility.
5Workforce reductions
To fund AI infrastructure, Oracle cut over 21,000 jobs (13% of workforce) in the past year. This 'people to machines' strategy aims to reduce costs while scaling cloud capacity to meet AI demand.
6Sector-wide warning signs
Financial regulators warn debt-fueled AI investments resemble dot-com bubble risks. The Bank for International Settlements sees parallels with 2008 crisis triggers, citing Nvidia and OpenAI debt as potential systemic risks.
Original article: Hacker News: Front Page — Oracle'nin kredi notu düşürüldü: BBB- seviyesine indi