Oracle: Updating Forecasts; Maintain M/P
Jordan Chalfin, CFA - Head of Technology, CreditSights
Michael Pugh - Analyst, CreditSights
17 November 2025
Insights into Oracle’s cloud infrastructure expansion—examining revenue growth, capital deployment, funding strategies, and credit metrics shaping bondholders’ investment outlook:
- Revenue Growth and Margin Dynamics: Examine how rapid cloud infrastructure expansion influences gross margin compression and operating leverage across Oracle’s evolving business segments.
- Capital Expenditure and Infrastructure Investment: Explore Oracle’s substantial capacity buildout requirements and timing considerations driving unprecedented spending levels in coming fiscal years.
- Debt Issuance Strategy and Funding Needs: Understand the multi-year bond issuance approach and balance sheet evolution supporting Oracle’s infrastructure expansion plans and obligations.
- Leverage Metrics and Credit Profile Assessment: Investigate how lease-adjusted leverage calculations and EBITDA growth trajectories shape Oracle’s credit quality and rating outlook.
- Customer Concentration and Revenue Visibility: Learn about significant customer dependencies and contracted revenue commitments creating both opportunities and uncertainties for financial projections.
Executive Summary
Bond rating maintained despite attractive long-term outlook and compelling valuation levels. Significant funding requirements and negative market sentiment currently overshadow investment appeal.
Financial projections updated through fiscal year incorporating recent management guidance and analysis. Operating expense assumptions lower than consensus while capital expenditure estimates significantly higher.
Substantial bond issuance anticipated over three-year period including recent debt offering. Total debt and lease obligations expected to increase materially during expansion phase.
Gross leverage metrics peak mid-period before improving as revenue growth accelerates significantly. Credit quality improves over time as business scales and capital spending normalizes.
Customer concentration represents material credit risk alongside massive infrastructure investment requirements. Cloud business expansion requires unprecedented capital deployment amid continued market uncertainty.
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