Oracle's Stock Drops Despite Impressive Growth Amid Debt Concerns

Oracle Corporation has reported remarkable growth figures, particularly in its AI infrastructure segment, but the company's stock fell by 12% following the release of its fiscal year 2026 results. The results revealed a substantial increase in remaining performance obligations, reaching $638 billion, primarily driven by large-scale AI cloud contracts.

Despite a 93% year-over-year growth in cloud infrastructure revenue in Q4 FY2026, Oracle's total debt stood at $129.5 billion as of May 31, prompting credit agencies to issue warnings. S&P Global downgraded Oracle's credit rating to BBB-, raising concerns about the company's ability to manage its debt load.

Management plans to raise an additional $40 billion in debt and equity during fiscal year 2027 to support ongoing AI infrastructure development. Investors are wary about the potential dilution of shares and the company's ability to convert its backlog into cash flow, especially as free cash flow remains negative.

Oracle's upcoming Q1 FY2027 earnings release, expected around September 10-14, 2026, will be closely monitored for insights into revenue growth, backlog conversion rates, and management's financing strategy.