⚠ BBB-: One Notch Above JunkHigh threat

Oracle (ORCL) — threat to the moat

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.

In July 2026 S&P Global cut Oracle's long-term issuer credit rating to BBB- from BBB1. BBB- is the lowest investment-grade rating. S&P expected adjusted leverage to reach the mid-4x area in fiscal 20272.

Credit markersS&P rating, July 2026BBB- (from BBB)S&P expected leverage FY2027mid-4xCredit default swapsabout 198.6bp, record highBonds in Bloomberg high-grade indexabout $120bnLeases not yet commenced, Aug 2026$288bnInvesting.com on S&P; TipRanks; Seeking Alpha; Oracle Q1 FY2027 10-Q
The lowest investment grade.

The market is pricing the risk more harshly. The cost of insuring Oracle's debt through credit default swaps rose to about 198.6 basis points3, and on 24 September 2026 Seeking Alpha reported that Oracle's credit default swaps had hit a record high4.

Oracle's annual report spells out why a rating matters more than usual. A downgrade could reduce its access to commercial paper, raise its cost of borrowing and "affect the terms or availability of certain long-term commitments (including data center leases)"5. A company that has signed $288 billion of leases not yet begun6 depends on landlords and their lenders believing it will pay.

The market's first reaction to the downgrade was calm. Oracle's shares rose 2.7% on the day S&P announced it7. The credit markets took longer to react; the record in credit default swap prices was reported on 24 September8, the day of the force majeure notice on Project Jupiter.

The rating is the single most important number for the build. A further cut, to sub-investment grade, would raise the cost of the $40 billion Oracle plans to raise this year9 and could change the terms of the leases on which the whole cloud plan rests.

References
  1. Third-party estimateIn July 2026 S&P Global cut Oracle's long-term issuer credit rating to BBB- from BBB.
    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 ↗
  2. Third-party estimateS&P expected adjusted leverage to reach the mid-4x area in fiscal 2027.
    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 ↗
  3. Third-party estimateThe cost of insuring Oracle's debt through credit default swaps rose to about 198.6 basis points, and on 24 September 2026 Seeking Alpha reported that Oracle's credit default swaps had hit a record high.
    TipRanks, Oracle credit default swap prices near record levels (about 198.6 basis points); about $120 billion of bonds in the Bloomberg high-grade index. — September 2026 · publ. September 2026 · source ↗
  4. Third-party estimateThe cost of insuring Oracle's debt through credit default swaps rose to about 198.6 basis points, and on 24 September 2026 Seeking Alpha reported that Oracle's credit default swaps had hit a record high.
    Seeking Alpha, Oracle credit default swaps hit record high as AI debt worries mount. — September 2026 · publ. 24 September 2026 · source ↗
  5. ReportedA downgrade could reduce its access to commercial paper, raise its cost of borrowing and "affect the terms or availability of certain long-term commitments (including 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 ↗
  6. ReportedA company that has signed $288 billion of leases not yet begun depends on landlords and their lenders believing it will pay.
    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. Third-party estimateOracle's shares rose 2.7% on the day S&P announced it.
    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 ↗
  8. Third-party estimateThe credit markets took longer to react; the record in credit default swap prices was reported on 24 September, the day of the force majeure notice on Project Jupiter.
    Seeking Alpha, Oracle credit default swaps hit record high as AI debt worries mount. — September 2026 · publ. 24 September 2026 · source ↗
  9. ReportedA further cut, to sub-investment grade, would raise the cost of the $40 billion Oracle plans to raise this year and could change the terms of the leases on which the whole cloud plan rests.
    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 ↗
Sources
Generated September 25, 2026