Oracle’s cloud infrastructure revenue rose 121% amid its AI buildout, while Alpha Spread put trailing 12-month free cash flow through August 2026 at negative $28.72 billion. Credit default swaps hit a record, and S&P cut Oracle’s rating to BBB, one notch above junk.
Oracle spent about $28.5 billion on capital expenditures in fiscal Q1 2027, versus $19.35 billion in quarterly revenue. Management expects fiscal 2027 net cash capex near $70 billion, against roughly $90 billion to $95 billion in reported capex, and has not provided a clear timeline for free cash flow to turn positive. The negative free cash flow largely reflects growth spending on GPUs, power infrastructure and data centers; operating cash flow remains strongly positive before that spending.
To limit its capital burden, Oracle is using customer prepayments, bring-your-own-hardware arrangements and third-party financing for some deployments. About $75 billion in AI infrastructure contracts in Q4 fiscal 2026 were structured mainly through prepayments or bring-your-own-hardware, and management said Q1 contracts required no additional Oracle capital to fulfill. If Oracle is downgraded below investment grade, $120 billion of its bonds would automatically leave investment-grade indexes, according to a Seeking Alpha analysis. Its $664 billion backlog offers revenue visibility, but not equal visibility into how much cash it will generate.
