Oracle (ORCL) shares have plummeted over 25% in 2026, driven by investor concerns regarding the company’s substantial investments in artificial intelligence and the resulting impacts on debt and cash flow. This unease is reflected in the credit markets, with Oracle’s five-year credit default swap (CDS) spread hitting a record 198 basis points, indicating heightened risk perceptions among bond investors. With approximately $120 billion of its bonds in the Bloomberg U.S. high-grade corporate bond index, Oracle’s high leverage is raising alarms on Wall Street.
Despite the stock’s decline, Oracle’s growth trajectory remains robust, highlighted by a 325% year-over-year increase in remaining performance obligations (RPO) and significant revenue growth in its cloud infrastructure and multi-cloud database segments. However, the company faces a stark challenge, with non-current debt skyrocketing to $124.7 billion and free cash flow dipping to negative $24.7 billion.
The key takeaway for investors is that while Oracle’s AI investments could yield substantial long-term returns, the immediate focus should be on its ability to bridge the gap between cash generation and funding needs. Until cash flow aligns with its aggressive spending, credit risk will continue to loom large over the stock.
Source: fool.com