Oracle has ramped up debt significantly to fund its AI infrastructure push issuing $18 billion in bonds and reportedly planning $35–38 billion in additional CapEx in fiscal 2026 to build out data centres.
As a result, its free cash flow has turned negative (around –$6 billion over the past 12 months).
Credit-market signals are flashing red: its five-year credit default swap (CDS) spreads have surged to their highest levels since 2009, reflecting elevated perceived risk.
• AI cloud margins under pressure
Internal data indicates Oracle’s AI-cloud services (renting Nvidia-powered servers) delivered just ≈14 % gross margin for the quarter ending August 2025 — far below the ~70 % margin typical of its legacy software business.
Worse: some GPU-rental offerings reportedly lost money in that period, due to high costs (hardware, energy, depreciation) and aggressive pricing to win clients.
• Over-reliance on a few large AI deals
A large portion of Oracle's AI backlog — estimates suggest as much as 58 % — may depend on a single customer: OpenAI. If OpenAI doesn’t follow through, or its AI usage falters, Oracle’s projections could unravel.
The heavy concentration increases “counterparty risk,” which many analysts warn heightens overall uncertainty.
• Skepticism over lofty long-term forecasts
Back in Oct 2025, Oracle announced a target of $225 billion in annual revenue by 2030, along with aggressive growth and margin ambitions.
But given the current margin squeeze, negative cash flow, and execution risks (data-center build bottlenecks, supply constraints, high ongoing costs), many investors are doubting whether those forecasts are realistic."
