Oracle's Debt Load Sparks Concern as Shares Plummet

Oracle's recent quarterly results showed the company's impressive growth, but investors are raising concerns about its debt load. The tech giant posted a 93% year-over-year increase in cloud infrastructure revenue for Q4 FY2026, with remaining performance obligations (RPO) reaching $638 billion as of May 31, 2026 - a 363% jump from last year.

The company's capital expenditures came in at $55.66 billion, surpassing its own target of $50 billion, resulting in a negative free cash flow of $23.7 billion for the year. Oracle's total debt stood at $129.5 billion as of May 31, and management plans to raise an additional $40 billion in debt and equity during fiscal year 2027 to fund its AI infrastructure buildout.

The S&P Global downgrade to BBB- in July 2026 added fuel to the already nervous market, raising borrowing costs and tightening access to cheap capital. Oracle's defenders argue that the company is following in the footsteps of Amazon, Microsoft, and Google, which all saw significant growth despite high debt levels during their cloud infrastructure scaling phases.

However, investors need assurance that backlog conversion will accelerate quickly enough to service the debt pile before credit conditions tighten further. The upcoming Q1 FY2027 earnings release on September 10-14, 2026, will be closely watched for revenue growth trajectory, backlog conversion rates, and management's commentary on financing strategy.