Oracle's $18B Data Centre Debt Strain Threatens AI Ambitions
Oracle's ambitious expansion into AI-driven data centres is facing significant financial and logistical challenges. The company issued $18 billion in bonds in September 2025, but its net debt is projected to exceed $105 billion by late 2025.
The bond issue was anchored by a reported $300 billion, five-year cloud contract with OpenAI, which is central to Oracle's bull case. However, the company's capital expenditure for fiscal year 2026 is tracking above $55 billion, and it will face negative free cash flow of around $24 billion.
The debt math is getting uncomfortable, and S&P cut Oracle's credit rating to BBB- in July 2026, placing the company exactly one notch above junk status. A single further downgrade would push Oracle into sub-investment-grade territory, triggering automatic selling by institutional bond holders and raising borrowing costs significantly.
Local opposition at several of Oracle's planned sites has resulted in project delays, formal legal challenges, and extended public comment periods that have stretched timelines and added costs. In New Mexico, community and regulatory pressure pushed Oracle to pivot away from gas turbines as a power source in favour of renewable energy infrastructure, a substantive change to the project's design and cost profile.