Moody's Raises Concerns Over Oracle's Ambitious AI Infrastructure Expansion

Moody's raises questions over Oracle's AI DC expansion plans

Ratings agency points out there's a risk of relying on a small number of buyers Ratings agency Moody's has pointed to the dangers inherent in Oracle's $300 billion agreement with OpenAI - one of the deals contributing to a staggering $455 billion pipeline of obligations for Big Red's cloud infrastructure. News of the demand for racks from AI model builders spiked Oracle's share price by 27 percent earlier this month, despite Big Red's muted figures for revenue and profit in its latest quarterly financials. Moody's said late last week that the OpenAI "contract size is staggering -- highlighting the tremendous potential for Oracle's AI Infrastructure. However, the related risks of the build are significant." It pointed to the significant "counterparty risk" in Oracle's projected growth - the possibility that another party fails to meet its obligations. "Counterparty risk is always a key consideration in any type of project financing, particularly where there is a high reliance on revenue from a single counterparty," Moody's analysts wrote on Wednesday. As The Register pointed out at the time of Oracle's results -- and others have said since -- OpenAI doesn't yet have the money it has promised to Big Red. It might be on track to raise $40 billion this year, for example. In July, Moody's noted Oracle's current debt obligations were also a risk to the AI infrastructure plans, which require significant capital expenditure. At the time it revised Oracle's outlook to negative, although the current risk rating remained unchanged. "The scale and speed of the entry into the standalone AI infrastructure business is unprecedented in Oracle's history and introduces a new business model very different from the core software business," said Moody's analyst Jones further. He added: "though ratings are not affected at this early stage, the speed of the change, and potential scale of investment particularly as the AI industry is still evolving, introduce an overhang to the ratings." On an earnings call following Oracle's Q1 2026 results, CEO Safra Catz said the company had signed significant cloud contracts with "the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD, and many others". This meant the company's remaining performance obligations -- contracts signed but not yet paid for -- were more than $455 billion, an increase of 359 percent from last year and up $317 billion from the end of Q4. ®

Moody's flags risk in Oracle's $300 billion of recently signed AI contracts

WASHINGTON, Sept 17 (Reuters) - U.S. credit rating agency Moody's Ratings flagged several potential risks in Oracle Corp's (ORCL.N), opens new tab $300 billion of recently signed artificial intelligence contracts, but stopped short of taking ratings action against the software giant. Oracle (ORCL.N), opens new tab said this month it expected booked revenue at its Oracle Cloud Infrastructure business to exceed half a trillion dollars. The Wall Street Journal then reported that OpenAI had signed a contract to purchase $300 billion in computing power from Oracle over roughly five years, marking one of the biggest cloud contracts ever signed. A majority of the new revenue Oracle described will come from the OpenAI deal, the report said. Moody's analysts on Wednesday referred to $300 billion in recently signed contracts without naming the customers involved. They noted the contracts highlight the "tremendous potential" for Oracle's AI infrastructure business. But they also brought attention to several risks laid out in Moody's July ratings action, opens new tab, where the agency revised Oracle's credit rating outlook to negative from stable. One of the main risks flagged by Moody's involved the "counterparty risk" of Oracle relying on large commitments from a small number of AI companies to fund its business model. "Counterparty risk is always a key consideration in any type of project financing, particularly where there is a high reliance on revenue from a single counterparty," Moody's analysts wrote on Wednesday. "And in our view, Oracle's data center build is effectively one of, if not the world's largest, project financing," they added. The analysts further noted the company will see its debt increase faster than its EBITDA, which will contribute to a forecast high leverage of 4x before Oracle's EBITDA begins to outpace its debt. "It is likely that free cash flow will also be negative for an extended period before reaching breakeven," the analysts wrote. Oracle had a Moody's issuer rating of Baa2, which is at the lower end of investment-grade credit ratings. Reporting by Matt Tracy; Editing by Jamie Freed Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Matt Tracy Thomson Reuters Reports on U.S. credit market activity, including corporate debt and credit ratings, U.S. Treasuries, commercial mortgages, and the ongoing public vs. private financing dynamic. He often reports on other topics and events in cooperation with team members across Reuters. Matt previously covered regulatory reviews and investigations into mergers and acquisitions, specifically anti-monopoly, national security, FCC and state-level investigations of some of the biggest deals since 2016. He has broken news on the government investigations into AT&T's merger with Time Warner, T-Mobile's purchase of Sprint, Bayer's merger with Monsanto, and many other multi-billion dollar combinations.

Moody's urgent outlook on Oracle's future growth path - here's what it means

Oracle growth outlook 2025: Oracle's AI ambitions have grown dramatically in recent weeks. After announcing a massive five-year, $300 billion deal to provide 4.5 gigawatts of compute power to OpenAI, the company's pipeline isn't just expanding, it's locking in, as per a report. But now Moody's has cautioned regarding the firm's future growth. Oracle's Remaining Performance Obligations (RPO), which represent contracted but undelivered work, soared 359% year-over-year to $455 billion. Management has hinted that this figure could soon top $500 billion, as per The Street report. This rapid growth has reshaped Oracle's balance sheet and positioned its cloud business as the company's central focus. Oracle's stock has reflected this momentum, rising over 81% so far in 2025, with six-month gains even higher at 96%, as per The Street. ALSO READ: Even after strongest quarterly performance since June 2021, SoftBank to layoff 20% of its Vision Fund team However, just days after announcing its latest deal, Moody's analysts issued a warning that could have major implications for Oracle's growth story. They highlighted the financial risk tied to Oracle's $300 billion AI contract with OpenAI, the largest in the company's history, according to The Street. Moody's cautions that such a concentrated deal places significant financial pressure on Oracle if OpenAI were to delay payments, restructure, or shift strategy, as per the report. Because of the scale and length of the contract, even small disruptions could have a big impact on Oracle's balance sheet, as per The Street report. ALSO READ: iOS 26 vs iOS 18: How your iPhone's home screen, lock screen, control center & features have changed Analysts also pointed out that Oracle's leverage could climb to nearly four times EBITDA before the company's new contracts begin to improve cash flow, as per The Street. While Moody's has not changed Oracle's current Baa2 rating, they warned that continued customer concentration and increasing debt levels could lead to further action if Oracle's financials don't improve, as per the report. Alongside these developments, Oracle recently announced a $300 million AI infrastructure contract, adding to its growing cloud backlog, as per The Street. This surge in RPO, up 359% year-over-year, shows that booked work is growing faster than Oracle's ability to deliver, as reported by The Street. But the size and duration of these multi-year infrastructure agreements could put pressure on Oracle's liquidity before sales catch up. Customer concentration and the execution of data-center buildouts are key factors that investors need to watch closely, as per The Street. What is Oracle's recent deal with OpenAI about? Oracle signed a huge five-year, $300 billion contract to supply AI compute power to OpenAI. Why is Moody's concerned about Oracle's growth? Because Oracle relies heavily on a few big contracts like OpenAI's, any hiccup could impact its financial health.

Oracle Stock Slips As Company Taps Debt Market For AI Infrastructure Spending: Report - Oracle (NYSE:ORCL)

Oracle ORCL stock slipped after it moved to raise $15 billion in the U.S. investment-grade bond market on Wednesday, according to people familiar with the transaction. The company offers debt in as many as seven tranches, including a rare 40-year bond. Early price talks pegged the long-dated security at about 1.65 percentage points above Treasuries of similar maturity, Bloomberg reported, citing unnamed sources familiar with the matter. Also Read: Oracle's Big AI Bet Faces Credit Risk, Rating Agency Warns Oracle is tapping debt markets as it ramps up cloud infrastructure projects tied to multibillion-dollar deals with OpenAI and Meta Platforms MSFT. These agreements require the company to invest heavily in data centers, with projected spending running into the hundreds of billions of dollars over the coming years. According to people close to the matter, the proceeds may be used for capital expenditures, acquisitions, investments, or debt repayment. Bank of America, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, and JPMorgan will manage the offering, which follows Oracle's last debt issuance in January. Benzinga reached out to Oracle investor relations team for their take on the report and is awaiting their response. Oracle stock gained over 88% year-to-date, topping the S&P 100 index's (which includes Oracle) 15% returns. Oracle joined OpenAI and SoftBank SFTBY in launching five new U.S. data centers under the $500 billion Stargate project, a private-sector initiative designed to build the compute backbone for next-generation AI. Oracle will expand with OpenAI at sites in Texas, New Mexico, and the Midwest, while SoftBank will lead additional builds in Ohio and Texas. Together, the projects have the potential to create 25,000 onsite jobs and push Stargate's near-term capacity toward seven gigawatts, with a long-term goal of 10 gigawatts. For Oracle, Stargate deepens its role as a critical AI infrastructure provider. Oracle held $11 billion in cash and equivalents as of August 31, 2025. Price Action: ORCL stock is down 2.68% at $305.50 at last check on Wednesday. Read Next: Chipmakers Ride AI Wave Towards Record Breaking Rally Photo: Shutterstock ORCLOracle Corp$306.24-2.42%OverviewMSFTMicrosoft Corp$510.070.16%SFTBYSoftBank Group Corp$63.933.75%Market News and Data brought to you by Benzinga APIs

Oracle's Big AI Bet Faces Credit Risk, Rating Agency Warns - Oracle (NYSE:ORCL)

Oracle ORCL stock continues to spur investor optimism, buoyed by its artificial intelligence deals. However, on Wednesday, Oracle faced scrutiny as Moody's Ratings highlighted potential risks in its recently signed $300 billion artificial intelligence contracts. The rating agency commented that this development is significant as it raises concerns about Oracle's reliance on large commitments from a small number of AI companies, which could impact its business model. Also Read: Oracle Soars To Record Highs With Massive Cloud Contracts Tied To OpenAI Moody's Ratings highlighted risks tied to Oracle's $300 billion AI contracts, including its massive deal with OpenAI. However, it chose not to change the company's credit rating. It compared its data center expansion to one of the largest project financings. Moody's also warned against Oracle's debt rising faster than EBITDA, amounting to negative free cash flow for years before breaking even. Reuters reports that Moody's analysts noted the "tremendous potential" for Oracle's AI infrastructure business but flagged counterparty risk as a critical issue. OpenAI Risk Meanwhile, OpenAI, a key player in the AI industry, is grappling with financial challenges as it struggles to meet its obligations under the $300 billion deal with Oracle. Reports indicate that OpenAI lacks the funds to honor the agreement, raising questions about its future and the impact on Oracle. Despite these issues, some experts believe OpenAI's deal with Oracle underscores its early leadership in the AI sector, suggesting potential investor interest in private markets. Short-seller Jim Chanos has expressed skepticism, questioning the quality and timing of Oracle's backlog and comparing it to past accounting controversies. ORCL Price Action Oracle stock has gained 81% year-to-date, topping the S&P 500 Information Technology Sector Index's 17% returns. During premarket trading on Thursday, Oracle shares were up 1.36% at $305.51. The stock is trading within its 52-week range of $118.86 to $345.72, according to Benzinga Pro data. Oracle's impressive 81.54% year-to-date return reflects strong momentum in the software sector, bolstered by rising demand for cloud solutions. With a P/E ratio of 69.77, the stock is trading at a premium, indicating high investor expectations for future growth, especially as it approaches the upper end of its 52-week range. Read Next: Nvidia's China Chip Boom Faces Threat As Beijing Pushes For Homegrown AI Photo by thanmano via Shutterstock ORCLOracle Corp$305.041.20%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum93.40Growth66.15QualityN/AValue8.99Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs

Oracle's credit ratings affirmed amid AI infrastructure expansion By Investing.com

Investing.com -- Oracle Corporation's credit ratings were affirmed by major rating agencies as the company accelerates its artificial intelligence infrastructure growth strategy, though concerns remain about increasing debt levels and negative free cash flow. S&P Global Ratings affirmed Oracle's 'BBB' rating with a negative outlook, citing strain on the company's credit profile due to aggressive capital expenditure plans. Oracle recently raised its fiscal 2026 capex guidance to $35 billion from $25 billion, with S&P forecasting actual spending could reach $38 billion in fiscal 2026 and peak above $60 billion in fiscal 2028. This spending trajectory is expected to widen Oracle's free operating cash flow deficit significantly beyond the $10 billion forecast for fiscal 2026, potentially pushing S&P-adjusted leverage above 4x in fiscal years 2027 and 2028. S&P loosened its downgrade trigger to 4x from 3.5x, acknowledging Oracle's business transition requires upfront spending before revenue generation. The agency views Oracle's AI investments more favorably than share buybacks or acquisitions. Moody's Ratings assigned a Baa2 rating to Oracle's proposed senior unsecured notes offering while maintaining its negative outlook. The agency highlighted Oracle's leading position across enterprise software and cloud infrastructure markets, but noted concerns about high leverage and continuing negative free cash flow. Moody's reported Oracle's adjusted debt to EBITDA was over 4x with trailing free cash flow at negative $5.1 billion as of May 31, 2025. The agency expressed concern that Oracle's $300 billion in recently signed AI contracts could result in an extended period of high leverage and negative cash flow. Fitch Ratings assigned a 'BBB' rating to Oracle's proposed benchmark size unsecured bonds with a stable outlook, supported by expectations that EBITDA leverage will remain below 3.5x. Fitch highlighted Oracle's strong financial flexibility with staggered debt maturities and approximately $11 billion in cash and marketable securities as of fiscal 1Q26. All three agencies acknowledged Oracle's competitive position in the AI infrastructure market but noted risks associated with rapid scaling and high customer concentration. S&P estimated that OpenAI could account for more than a third of total Oracle revenues by fiscal 2028, viewing Nvidia's recent $100 billion investment in OpenAI as a credit positive for Oracle given its exposure. The rating agencies indicated they would consider upgrades if Oracle demonstrates successful execution of its AI strategy while maintaining appropriate leverage metrics and returning to positive free cash flow. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.