Oracle’s silicon dreams: a harsh awakening?

In the competitive landscape of enterprise technology, Oracle Corporation has undergone a significant transformation over nearly five decades, shifting from its roots as a relational database provider to a major player in cloud and AI infrastructure.While the company demonstrates significant growth potential through bold initiatives, investors must weigh this against substantial risks, such as a growing debt load, intensifying competition with larger hyperscalers, and considerable execution challenges.Oracle’s latest fiscal results reflect this duality: cloud revenues are expanding at a rapid pace, legacy segments are stagnating or contracting, and aggressive capital spending is straining free cash flow.In this note, we assess the group's financial outlook and explore the possible scenarios for financing its AI-driven hypergrowth.Our econometric model actually indicates a further risk of short-term widening for its 10Y bonds towards z+300bp and a 5Y CDS around 230bp (from 150bp currently).Moreover, given the leverage trajectory, a risk of a rating downgrade by Moody’s in H1-26 to Baa3 is high, adding pressure on the liquidity profile and its refinancing capacity.However, Oracle could avoid such a market pressure with a capital increase of $10-15bn, which would enable the adjusted debt/ Ebitda ratio to fall below 3.5 x by end 2027.