Barclays downgrades Oracle ORCL rating, close to junk status! CapEx surges, cash flow may be cut off next year.

Barclays has released its latest report, downgrading Oracle's debt rating to Underweight and warning that its cash may run out before November 2026. In the grand AI infrastructure race, Oracle's financial health is rapidly deteriorating, with its credit default swap (CDS) prices soaring simultaneously.

Barclays: Oracle's capital expenditures far exceed its free cash flow capacity

The Barclays fixed income research team pointed out that Oracle's massive capital expenditure (CapEx) in recent years to fulfill large AI contracts has far exceeded the company's free cash flow capacity, forcing it to rely heavily on external financing. The report predicts that the funding gap will rapidly widen after June 2026, with cash potentially running out as early as November 2026. Credit ratings are at risk of falling to BBB-, approaching junk bond territory.

AI data center costs soar to three times that of traditional ones, with CapEx forecasts nearly doubling.

The core reason for the rapid increase in capital expenditures is the skyrocketing costs of AI data centers. Barclays cited industry data indicating that the construction cost of AI data centers reaches up to 50 to 60 billion dollars per GW, which is three times that of traditional data centers, with over half of the costs stemming from the purchase of GPU computing hardware from NVIDIA and others. Since early 2025, global tech companies' projected CapEx for the coming years has nearly doubled. In the United States alone, the announced AI data centers will add a new electricity demand of 45 GW, with an investment scale exceeding 2 trillion dollars.

Under the AI arms race, it has become common for tech giants to issue corporate bonds.

Barclays pointed out that these companies have relied heavily on strong operating cash flows to support expansion in the past, rarely making significant forays into debt market financing. Most hyperscale suppliers still generate substantial free cash flow, but the ongoing buybacks and dividends from companies like Google and Meta are rapidly depleting the funds available for investment. In recent months, these hyperscale suppliers have issued $140 billion in corporate bonds.

The trading volume of these corporate bonds is astonishing, averaging about $25 billion per transaction. Even for AA-rated companies like Meta and Google, new bond yields are continuously rising, indicating that the market is demanding higher risk premiums to absorb the enormous supply. Barclays believes this is not a short-term phenomenon but a long-term trend, with intensified AI competition, rising capital expenditures, and expanding financing needs. More frequent and larger-scale debt issuances will become the norm.

Barclays: Oracle is the AI giant with the most vulnerable financial situation.

Among these large-scale suppliers, companies like Meta, Google, and Oracle have tighter cash flow, while Microsoft and Amazon have more stable cash, providing greater financing flexibility. Barclays specifically pointed out that Oracle's financial leverage ( debt-to-equity ratio ) is far higher than that of other AI giants:

Oracle: 500%

Amazon: 50%

Microsoft: 30%

Meta / Google: Lower

Barclays pointed out that the entire hyperscale supplier industry is fueling AI expansion with large-scale bond issuance, but Oracle's financial situation is the most fragile, making it the weak link in the industry.

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