Shares of Oracle (NYSE: ORCL) have declined over 25% so far in 2026, as investors are growing increasingly concerned about the effect of its aggressive artificial intelligence (AI) investments on debt, cash flow, and credit risk.
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The shift in perception is reflected not just in share prices, but also in credit markets. Oracle’s five-year credit default swap (CDS) spread has recently climbed to around 198 basis points, the highest level on record. This implies that bond investors are demanding higher compensation to hold Oracle’s debt. With around $120 billion of Oracle’s bonds included in the Bloomberg U.S. high-grade corporate bond index, Wall Street is increasingly worried about the company’s high leverage level.
Oracle’s growth story is still intact. The company exited the third quarter of fiscal 2026 (ending Feb. 28, 2026) with remaining performance obligations (RPO, a measure of long-term contractual commitments for cloud and AI infrastructure) of approximately $553 billion, up 325% year over year. This massive backlog provides strong multi-year revenue visibility.
This demand is already translating into rapid growth. Oracle’s cloud infrastructure (OCI) revenue surged 84% year over year, while total cloud revenues rose 44% year over year in Q3. Oracle’s multi-cloud database business also grew 531% year over year in Q3, as enterprises increasingly run Oracle databases across platforms such as Microsoft‘s Azure, Amazon‘s AWS, and Alphabet‘s Google Cloud. By enabling customers to run Oracle databases across major cloud platforms without significant migration or data-transfer constraints, the multi-cloud strategy is helping drive increased adoption.
Oracle’s AI infrastructure business is already delivering gross margins above 30%, while the multicloud database business continues to generate gross margins in the 60% to 80% range. Hence, if execution remains on track, Oracle’s current investments could translate into significant long-term cash flow generation.
Oracle’s non-current debt has surged to roughly $124.7 billion at the end of Q3, up sharply from about $85 billion a year earlier. The company’s net debt is over $95 billion, compared to around $17.3 billion in operating cash flow generated in the first nine months of fiscal 2026. Hence, there is a significant gap between cash generation and funding needs.
