Will Moody’s and S&P reclassify Oracle’s bonds as junk debt? Key points investors need to know

Oracle Credit Risk is rising as the company invests billions in AI infrastructure. Investors are watching closely as debt levels rise and free cash flow remains under pressure. Moody’s and S&P both issued negative prospectsand warned that Oracle’s bonds could run into trouble if expenses exceed revenue.

Moody’s gives Oracle a rating of Baa2a step above scrap, with a Negative Outlook. S&P gives the company a rating BBBalso investment grade, but with a Negative Outlook after the September assessment. Both agencies have not yet downgraded Oracle to the speculative level. However, they warn that financial pressures are increasing faster than previously thought. The market reacts to these signals long before a formal rating change is made.

The company takes on debt on a scale not seen in Big Tech. Oracle’s adjusted leverage ratio is expected to move towards 4× EBITDAaccording to separate analyzes by both agencies. Free cash flow remains weak due to historically high AI-related capital expenditures. Oracle…