Oracle’s credit score just took a hit — and OpenAI is the reason why

S&P Global Ratings has cut Oracle’s long-term issuer credit rating one notch, from ‘BBB’ to ‘BBB-‘, now just above speculative-grade, commonly known as junk status. The agency kept a stable outlook, but its reasoning centers on one company: Sam Altman’s OpenAI.

S&P estimates that OpenAI accounts for roughly half of Oracle’s $638 billion in remaining performance obligations (RPO), the contracted revenue Oracle expects to book in the years ahead. If OpenAI is unable to pay for the capacity it has committed to, S&P warned, Oracle ‘could be left with massive data center leases’ with no tenant to fill them.

The downgrade builds on a negative outlook S&P first assigned to Oracle in July 2025 over the pace of its AI infrastructure buildout. ‘We now recognize that we underestimated the scale of the investments required to expand the AI business and its impact on our overall view of Oracle’s creditworthiness,’ the agency said in its announcement.

Oracle’s cloud infrastructure business made up 27% of its revenue in fiscal 2026, and S&P projects that share will climb to almost 60% by fiscal 2028. S&P views this business as considerably riskier than Oracle’s long-established enterprise software and database operations, since it requires heavy upfront capital spending on data centers while returns only arrive over the life of multi-year contracts.

Competition for that same AI compute demand is also building. S&P flagged SpaceX’s recent decision to lease its own compute capacity to Anthropic and Alphabet, with Meta potentially following, as a sign of a more crowded market that could pressure Oracle’s re-leasing terms when existing contracts expire. In a downturn, S&P expects Oracle to fare worse than rival hyperscalers because of its heavier reliance on external customers rather than internal workloads, and because larger competitors have more financial room to outspend it.

S&P said it could downgrade Oracle again if leverage sustains above 4.5x, if the company isn’t on track for positive free operating cash flow by fiscal 2029, or if it takes a negative view of Oracle’s AI strategy or the AI industry broadly. An upgrade, while considered unlikely over the next two years, would require Oracle to hit its growth targets while consistently generating positive free cash flow and bringing leverage down to the mid-3x range.

Wikimedia Commons/by Hakan Dahlstrom