Financing the BuildThin moat

Oracle (ORCL) — moat facet

Oracle's database cash no longer covers its spending, so lenders, new shareholders and its own customers are now financing the build.

For most of its history Oracle's moat produced more cash than it could use. It spent $36,140 million on its own shares in fiscal 20191. That era is over. In fiscal 2026 Oracle's capital expenditures were $55,663 million against operating cash flow of $31,977 million2, and free cash flow was minus $23,686 million3.

Net debt ($bn)81.4May 202597.6May 202688.3Aug 2026Oracle Form 10-K FY2026; Q1 FY2027 release; borrowings less cash and securities, calculated
Down after the share sale, not after the cash flow.

The gap is being filled from three directions. Lenders: borrowings rose from $87,202 million in May 2024 to $130,105 million in May 202645. Shareholders: Oracle sold $19.9 billion of common stock in the first quarter of fiscal 20276 and $4,954 million of mandatory convertible preferred in fiscal 20267. Customers: $75 billion of the equipment in its large AI contracts is prepaid or customer supplied8.

The price of this is visible in the credit market. S&P cut Oracle's rating to BBB- from BBB in July 20269, one notch above junk, and Oracle's credit default swaps hit record highs in September 202610.

Nothing here weakens the database moat directly; the customers still pay their support. What it changes is the risk the owners carry. A wide moat financed with growing debt is worth less than the same moat with a net cash balance, and Oracle had net debt of about $88.3 billion in August 202611.

Oracle itself describes the arithmetic plainly. In fiscal 2026 it raised $43 billion in debt financing and $5 billion in equity financing12, and it expects to raise about $40 billion in fiscal 202713. In February 2026 alone, it said, it raised about $30 billion through investment grade bonds and mandatory convertible preferred stock14. Its own measure of net cash outlay for capital expenditures, after customer prepayments and short-term financing, was $47,726 million in fiscal 202615.

The equity side has changed as much as the debt. Oracle stockholders' equity was $1,073 million at the end of fiscal 2023, $8,704 million at the end of fiscal 2024 and $42,508 million at the end of fiscal 20261617. Profits and new shares, not buybacks, now shape the balance sheet, and the accumulated deficit shrank from $22,628 million to $4,309 million in two years18.

This part of the business is where the thesis can break. It would break at the rating: a cut below investment grade would raise the cost of every future dollar and, Oracle says, could affect the availability of data center leases19.

Moat trajectory: Narrowing

FCF negative, debt $130bn, rating cut to BBB-.

The number that tests this moat
Moat Explorer calc
Net debt, latest quarter
About $88.3bn (Aug 2026), from $97.6bn in May 2026

Borrowings less cash; a rise back above $100bn while free cash flow stays negative would mean the equity raise only bought one quarter.

How it's calculated: Notes payable and borrowings (current $7,625M plus non-current $117,712M) less cash ($36,369M) and marketable securities ($708M), from Oracle's Q1 FY2027 results release.
Source: Moat Explorer calculation from Oracle filings ↗
Aspects of the moat
DIG DEEPER 01
Free Cash Flow: Minus $23.7 Billion
Oracle burned $23.7 billion of free cash in fiscal 2026 and plans to raise another $40 billion this year, while still paying a dividend.
DIG DEEPER 02
Debt: $87 Billion to $130 Billion
Oracle's debt rose by about half in two years and it is now one of the biggest bond issuers outside the banks.
DIG DEEPER 03
Shareholders Now Fund It Too
Oracle spent $36 billion buying back its stock in one year and now sells $20 billion of it in one quarter to pay for datacenters.
DIG DEEPER 04
The Customer Who Pays for the Equipment
Customers have prepaid or supplied $75 billion of the equipment in Oracle's large AI contracts, which is the strongest evidence those contracts are…
⚠ Threats to the moat
⚠ THREAT 01
BBB-: One Notch Above Junk
Oracle is one notch above junk and its credit default swaps hit a record, while its whole cloud plan depends on landlords trusting its credit.
⚠ THREAT 02
Capex at 83% of Revenue
Oracle spent more on capital equipment than it earned in revenue in the latest quarter, which is the cost structure of a utility, not a software…
References
  1. ReportedIt spent $36,140 million on its own shares in fiscal 2019.
    SEC EDGAR XBRL company facts for Oracle (CIK 1341439) - revenue, net income, R&D, capital expenditure and share repurchases for fiscal 2015-2026. — FY2015-FY2026 · publ. September 2026 · source ↗
  2. ReportedIn fiscal 2026 Oracle's capital expenditures were $55,663 million against operating cash flow of $31,977 million, and free cash flow was minus $23,686 million.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - financial statements and notes: income statement, cash flow, borrowings, leases, equity and commitments. — FY2026 · publ. 22 June 2026 · source ↗
  3. ReportedIn fiscal 2026 Oracle's capital expenditures were $55,663 million against operating cash flow of $31,977 million, and free cash flow was minus $23,686 million.
    Oracle first-quarter fiscal 2027 results release, Form 8-K exhibit 99.1, with supplemental tables - income statement, cash flow statement and balance sheet. — Q1 FY2027 · publ. 10 September 2026 · source ↗
  4. ReportedLenders: borrowings rose from $87,202 million in May 2024 to $130,105 million in May 2026.
    Oracle Form 10-K for fiscal 2025 - revenue by ecosystem, lease commitments, employees and borrowings. — FY2025 · publ. June 2025 · source ↗
  5. ReportedLenders: borrowings rose from $87,202 million in May 2024 to $130,105 million in May 2026.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - notes on borrowings, leases, commitments and guarantees. — FY2026 · publ. 22 June 2026 · source ↗
  6. ReportedShareholders: Oracle sold $19.9 billion of common stock in the first quarter of fiscal 2027 and $4,954 million of mandatory convertible preferred in fiscal 2026.
    Oracle Form 10-Q for the quarter ended 31 August 2026 - segments, leases not yet commenced, the ATM share programme, RPO timing and shares outstanding. — Q1 FY2027 · publ. 11 September 2026 · source ↗
  7. ReportedShareholders: Oracle sold $19.9 billion of common stock in the first quarter of fiscal 2027 and $4,954 million of mandatory convertible preferred in fiscal 2026.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - financial statements and notes: income statement, cash flow, borrowings, leases, equity and commitments. — FY2026 · publ. 22 June 2026 · source ↗
  8. ReportedCustomers: $75 billion of the equipment in its large AI contracts is prepaid or customer supplied.
    Oracle fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1 - financing, $75 billion of prepaid and customer-supplied hardware, Oracle Health and multicloud. — FY2026 · publ. 10 June 2026 · source ↗
  9. Third-party estimateS&P cut Oracle's rating to BBB- from BBB in July 2026, one notch above junk, and Oracle's credit default swaps hit record highs in September 2026.
    Investing.com via Yahoo Finance, S&P downgrades Oracle to BBB-; S&P expects a negative $42 billion fiscal 2027 free operating cash flow and views OpenAI as roughly half of RPO. — July 2026 · publ. 9 July 2026 · source ↗
  10. Third-party estimateS&P cut Oracle's rating to BBB- from BBB in July 2026, one notch above junk, and Oracle's credit default swaps hit record highs in September 2026.
    Seeking Alpha, Oracle credit default swaps hit record high as AI debt worries mount. — September 2026 · publ. 24 September 2026 · source ↗
  11. Moat Explorer calcA wide moat financed with growing debt is worth less than the same moat with a net cash balance, and Oracle had net debt of about $88.3 billion in August 2026.
    Moat Explorer calculation from Oracle's reported figures ($ millions unless stated; fiscal years end 31 May). Revenue lines: software support 19,804 / 19,365 - 1 = 2.3% (FY2022-FY2026); support share 19,804 / 67,357 = 29.4%; support Q1 FY2027 4,895 / 4,955 - 1 = -1.2%; licences FY2026 4,737 / 5,201 - 1 = -8.9%; licences Q1 FY2027 655 / 766 - 1 = -14.5%; licences FY2017 to FY2026 4,737 / 6,523 - 1 = -27.4%; fourth-quarter licences 1,881 / 4,737 = 39.7%. Software (licence plus support) FY2022 5,878 + 19,365 = 25,243; FY2023 5,779 + 19,426 = 25,205; FY2026 24,541 / 24,724 - 1 = -0.7%; software share 24,541 / 67,357 = 36.4%. Cloud infrastructure FY2026 18,101 / 10,234 - 1 = 76.9%; FY2024 to FY2026 18,101 / 6,840 = 2.6 times; share 18,101 / 67,357 = 26.9%; Q1 FY2027 share 7,388 / 19,345 = 38.2%; annual run rate 7,388 x 4 = 29,552. Cloud applications FY2025 14,272 / 12,934 - 1 = 10.3%; FY2026 15,888 / 14,272 - 1 = 11.3%; share 15,888 / 67,357 = 23.6%; trailing twelve months 15,888 - 3,839 + 4,219 = 16,268. Applications ecosystem revenue 18,172 / 16,651 - 1 = 9.1%; 19,383 / 18,172 - 1 = 6.7%. Hardware segment margin 2,017 / 3,084 = 65.4% (FY2026); 1,709 / 4,152 = 41.2% (FY2017); 1,903 / 3,443 = 55.3% (FY2020); 1,932 / 3,274 = 59.0% (FY2023); 452 / 774 = 58.4% (Q1 FY2027); hardware revenue 3,084 / 4,152 - 1 = -25.7%; 3,084 / 5,205 - 1 = -40.7%; share 3,084 / 67,357 = 4.6%. Services margin 1,533 / 5,743 = 26.7% (FY2026); 993 / 5,233 = 19.0% (FY2025); 698 / 3,359 = 20.8% (FY2017); 450 / 3,106 = 14.5% (FY2020); 1,104 / 5,594 = 19.7% (FY2023); 445 / 1,414 = 31.5% (Q1 FY2027); services growth 5,743 / 5,233 - 1 = 9.7%; share 5,743 / 67,357 = 8.5%; revenue per services employee 5,743 / 34,000 = about $169,000. Cloud and software segment margin 20,801 / 30,452 = 68.3% (FY2017); 23,169 / 34,101 = 67.9% (FY2021); 26,126 / 41,086 = 63.6% (FY2023); 28,514 / 44,464 = 64.1% (FY2024); 30,930 / 49,230 = 62.8% (FY2025); 34,468 / 58,530 = 58.9% (FY2026); 7,691 / 12,907 = 59.6% (Q1 FY2026); 9,358 / 17,157 = 54.5% (Q1 FY2027); segment expenses 16,850 / 8,783 - 1 = 91.8%; segment revenue 58,530 / 44,464 - 1 = 31.6%; Q1 segment revenue 17,157 / 12,907 - 1 = 32.9%. Revenue growth 67,357 / 57,399 - 1 = 17.3%; FY2022 to FY2026 67,357 / 42,440 - 1 = 58.7%; Cerner share of FY2023 revenue 5,900 / 49,954 = 11.8%. Research and development 10,272 / 5,524 = 1.9 times; 10,272 / 67,357 = 15.3%. Sales and marketing 8,274 / 52,961 = 15.6% (FY2024); 8,651 / 57,399 = 15.1% (FY2025); 8,331 / 67,357 = 12.4% (FY2026); 8,331 / 8,651 - 1 = -3.7%; revenue per dollar of selling 52,961 / 8,274 = 6.4 and 67,357 / 8,331 = 8.1. Operating margin 15,353 / 52,961 = 29.0%; 17,678 / 57,399 = 30.8%; 20,606 / 67,357 = 30.6%; before amortisation (15,353 + 3,010) / 52,961 = 34.7%, (17,678 + 2,307) / 57,399 = 34.8%, (20,606 + 1,671) / 67,357 = 33.1%; amortisation 1,671 / 67,357 = 2.5%; non-GAAP less GAAP operating income 28.9 - 20.6 = 8.3 bn. Headcount 162,000 - 141,000 = 21,000, 21,000 / 162,000 = 13%. Headcount against the fiscal 2023 peak 164,000 - 141,000 = 23,000. Hardware FY2015 to FY2026 3,084 / 5,205 - 1 = -40.7%. Amortisation Q1 420 - 202 = 218. Stock compensation plus restructuring FY2026 4,811 + 1,838 = 6,649. Americas 44,478 / 36,339 - 1 = 22.4%; Americas share 23,679 / 42,440 = 55.8% (FY2022), 33,122 / 52,961 = 62.5% (FY2024), 44,478 / 67,357 = 66.0% (FY2026), 13,711 / 19,345 = 70.9% (Q1 FY2027); Asia Pacific 7,582 / 6,750 - 1 = 12.3%; EMEA plus Asia Pacific Q1 FY2027 3,726 + 1,908 = 5,634. US long-lived assets 102,717 / 45,439 = 2.3 times. Free cash flow FY2025 20,821 - 21,215 = -394; FY2024 18,673 - 6,866 = 11,807. Capital expenditure share of revenue 6,866 / 52,961 = 13%; 21,215 / 57,399 = 37%; 55,663 / 67,357 = 83%; 28,499 / 19,345 = 147%. Property added 127,845 - 99,957 = 27,888. Q1 FY2027 operating cash flow excluding prepayments 23,103 - 11,363 = 11,740; prepayments share 11,363 / 23,103 = 49%; free cash flow excluding prepayments -5,396 - 11,363 = -16,759. Borrowings 130,105 / 87,202 - 1 = 49%; net debt May 2025 92,568 - 10,786 - 417 = 81,365; May 2026 129,541 - 31,289 - 605 = 97,647; August 2026 7,625 + 117,712 - 36,369 - 708 = 88,260. Interest 1,428 / 923 - 1 = 55%; interest over operating income 1,428 / 6,728 = 21%. Leases not yet commenced over borrowings 288 / 125.3 = 2.3 times; over total assets 288 / 303.3 = 95%. Depreciation 3,156 / 1,351 = 2.3 times. Diluted shares 3,000 / 2,823 - 1 = 6.3%, 3,000 - 2,823 = 177 million; Ellison 1,158.2 / 3,023.7 = 38.3%; pledged 346 / 1,158 = 30%. Remaining performance obligations: 664 / 138 = 4.8 times; 664 / 455 - 1 = 46%; next twelve months 12% x 638 = 77 bn and 13% x 664 = 86 bn; beyond 36 months 100% - 13% - 37% = 50%; quarterly increases 455 - 138 = 317, 523 - 455 = 68, 553 - 523 = 30, 638 - 553 = 85, 664 - 638 = 26. Targets: 225 / 67.357 = 3.3 times; 225 - 24.5 = about 200 bn; 144 / 18 = 8 times; 20 / 2.4 = 8.3 times; Q1 FY2027 revenue 19,345 / 90,000 = 21.5% of guidance. Other: total assets 303,259 - 261,759 = 41,500 in one quarter; revenue FY2026 against FY2023 67,357 / 49,954 - 1 = 34.8%; cloud infrastructure Q1 FY2027 over Q4 FY2026 7,388 - 5,787 = 1,601; quarterly steps 4,079 - 3,347 = 732, 4,888 - 4,079 = 809, 5,787 - 4,888 = 899; cloud applications share 3,839 / 14,926 = 25.7% (Q1 FY2026) and 4,219 / 19,345 = 21.8% (Q1 FY2027); dividends over support 5,787 / 19,804 = 29.2%; interest, research and dividends 4,599 + 10,272 + 5,787 = 20,658; support FY2015 to FY2026 19,804 - 18,847 = 957; US revenue share 39,835 / 67,357 = 59.1%. Trailing twelve months to August 2026: revenue 67,357 - 14,926 + 19,345 = 71,776; net income 17,087 - 2,927 + 4,760 = 18,920; diluted EPS 5.83 - 1.01 + 1.56 = 6.38; P/E 421,930 / 18,920 = 22.3; P/S 421,930 / 71,776 = 5.88 - cash flow, capital spending, debt, leases, shares and backlog. — FY2015-Q1 FY2027 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Oracle's Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
  12. ReportedIn fiscal 2026 it raised $43 billion in debt financing and $5 billion in equity financing, and it expects to raise about $40 billion in fiscal 2027.
    Oracle fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1 - financing, $75 billion of prepaid and customer-supplied hardware, Oracle Health and multicloud. — FY2026 · publ. 10 June 2026 · source ↗
  13. ReportedIn fiscal 2026 it raised $43 billion in debt financing and $5 billion in equity financing, and it expects to raise about $40 billion in fiscal 2027.
    Oracle fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1 - financing, $75 billion of prepaid and customer-supplied hardware, Oracle Health and multicloud. — FY2026 · publ. 10 June 2026 · source ↗
  14. ReportedIn February 2026 alone, it said, it raised about $30 billion through investment grade bonds and mandatory convertible preferred stock.
    Oracle third-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - AI code generation and customer-funded equipment. — Q3 FY2026 · publ. 10 March 2026 · source ↗
  15. ReportedIts own measure of net cash outlay for capital expenditures, after customer prepayments and short-term financing, was $47,726 million in fiscal 2026.
    Oracle first-quarter fiscal 2027 results release, Form 8-K exhibit 99.1, with supplemental tables - income statement, cash flow statement and balance sheet. — Q1 FY2027 · publ. 10 September 2026 · source ↗
  16. ReportedOracle stockholders' equity was $1,073 million at the end of fiscal 2023, $8,704 million at the end of fiscal 2024 and $42,508 million at the end of fiscal 2026.
    Oracle Form 10-K for fiscal 2024 - cloud services and licence support for FY2022-FY2024, revenue by ecosystem and geography. — FY2024 · publ. June 2024 · source ↗
  17. ReportedOracle stockholders' equity was $1,073 million at the end of fiscal 2023, $8,704 million at the end of fiscal 2024 and $42,508 million at the end of fiscal 2026.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - financial statements and notes: income statement, cash flow, borrowings, leases, equity and commitments. — FY2026 · publ. 22 June 2026 · source ↗
  18. ReportedProfits and new shares, not buybacks, now shape the balance sheet, and the accumulated deficit shrank from $22,628 million to $4,309 million in two years.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - financial statements and notes: income statement, cash flow, borrowings, leases, equity and commitments. — FY2026 · publ. 22 June 2026 · source ↗
  19. ReportedIt would break at the rating: a cut below investment grade would raise the cost of every future dollar and, Oracle says, could affect the availability of data center leases.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - Item 1A risk factors: customer concentration and credit, multicloud, lease terms, credit ratings, export rules. — FY2026 · publ. 22 June 2026 · source ↗
Sources
Generated September 25, 2026