Oracle’s AI Build-Out Creates a $70 Billion Cash Drain and a Near-Junk Rating
Published on 07/17/2026 at 14:25 | Redaktion boerse-global.de
Oracle’s stock is trading just above its 52-week low of €108.20, a level reached only a day ago, as the market digests the full cost of the company’s bet on artificial-intelligence infrastructure. At €108.68, the shares have lost nearly 35% since the start of the year and more than 61% from the September 2025 high of €280.70. The sell-off has been so steep that the 30-day annualised volatility has hit 46%, and the relative strength index sits at 26.5—deep in oversold territory.
Yet the demand side of the equation remains remarkably strong. Oracle’s cloud business, OCI, is growing at 93% and its proprietary GPU fleet is running at 97.5% utilisation, siphoning AI workloads from larger rivals. The company holds a record $638 billion in remaining performance obligations, a backlog that would take years to convert into revenue. In a sign of its sovereign cloud ambitions, Oracle is the frontrunner for a highly sensitive cloud project with the Japanese government, beating out Amazon Web Services and Microsoft. The company has committed to investing more than $8 billion in Japanese cloud infrastructure over the next decade. Meanwhile, on July 14, 2026, Oracle launched an AI Agent Studio for its Fusion Applications, a platform that lets developers build agentic software capable of automating business processes.
The problem is not demand—it is the sheer scale of the investment required to deliver on that demand. In fiscal 2026, Oracle posted a negative free cash flow of $23.7 billion as it poured capital into data centres, including its participation in the Stargate project with OpenAI and SoftBank. For fiscal 2027, the company plans capital expenditures of up to $95 billion, resulting in a net cash outflow of roughly $70 billion after accounting for customer prepayments. Total debt has already ballooned to $130 billion.
That capital hunger triggered a credit downgrade from S&P Global Ratings on July 9, 2026, which cut Oracle’s long-term rating from BBB to BBB-—just one notch above junk status. S&P cited “exceptionally high” AI-related investments, rising component costs, and increased concentration risk.
Should investors sell immediately? Or is it worth buying Oracle?
To bridge the gap, Oracle is tapping both debt and equity markets. In the current fiscal year it has already raised $43 billion in new debt and $5 billion in fresh equity. For fiscal 2027 it plans another $40 billion in financing, anchored by a $20 billion at-the-market share issuance. Notably, Oracle intends to avoid taking on additional debt in 2026, which means the bulk of that $40 billion will come from equity. That strategy preserves the credit rating but at the cost of diluting existing shareholders at a time when the stock is plumbing yearly lows.
The market’s reaction has been unequivocal. The stock moves on financing headlines rather than quarterly results, and the wide gap between the current price and the consensus analyst target of €219.91—implying roughly 102% upside—highlights the disconnect. Either the market is underestimating Oracle’s cloud trajectory, or the analyst models have yet to fully price in the risk of sustained dilution and rising capital costs.
Oracle continues to pay a quarterly dividend of $0.50 per share, with an ex-dividend date of July 10, 2026. That payout, along with the backlog, offers a reminder that the company still generates cash from its established software business. But with net investments potentially topping $70 billion next year, the sustainability of that dividend will face increasing scrutiny.
Oracle at a turning point? This analysis reveals what investors need to know now.
Oracle’s predicament is not unique—every major tech company is racing to build AI capacity. Yet the likes of Amazon, Microsoft, and Google generate enormous free cash flow to fund their builds. Oracle is trying to match their pace without that cushion, relying instead on the financial markets to underwrite a future that has not yet arrived. The $638 billion backlog is real. So is the bill that comes with it.
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