Gather the latest credit-rating actions and outlooks on Oracle from Moody's, S&P, and Fitch, including downgrade triggers and stated rationale.

Oracle is the credit market’s liquid proxy for AI-buildout risk: agencies still rate it investment grade, but 5-year CDS near 260 basis points and long bonds yielding above 8% already price it closer to high-yield. The gap is the cost of funding a cash-flow-negative infrastructure ramp that peers are mostly financing from stronger balance sheets.

Rating actions: one notch from junk at S&P, split among the agencies

S&P is the agency that has already moved. On July 9, 2026 it cut Oracle’s long-term issuer credit rating to BBB- from BBB and the short-term rating to A-3 from A-2, with a stable outlook. That leaves Oracle one notch above speculative grade at S&P. The agency had put the outlook at negative in July 2025 specifically because of the pace of the AI infrastructure buildout. The July 2026 cut reflects a more cautious view of the AI infrastructure industry itself—rising capex, an uncertain path to profitability, a shifting competitive landscape, and high customer concentration—plus weaker free operating cash flow in fiscal 2027 and S&P-adjusted leverage staying above 4x for the next two years (mid-4x in fiscal 2027, improved from a prior 4.8x forecast after equity issuance). S&P has flagged OpenAI concentration in the remaining performance obligations as a central credit risk. It expects fiscal 2027 capex of about $90–95 billion and a free operating cash flow deficit near $42 billion, financed with a mix of debt and equity. [1] [2] [1] [3]

Further S&P downgrade triggers (explicitly stated):
- Sustained leverage above 4.5x (the old BBB threshold was 4x; base case peaks around 4.4x and is not expected to breach 4.5x).
- A view that Oracle is not on a path to positive free operating cash flow by fiscal 2029.
- A more negative view of Oracle’s AI strategy or of the AI industry overall.

An upgrade is described as unlikely over the next two years and would require growth targets plus consistently positive free operating cash flow. [1] [3]

Moody’s is one notch higher and still negative. It rates Oracle Baa2 (equivalent to BBB) with a negative outlook. On February 2, 2026 it affirmed Baa2 and kept the outlook negative around the equity-issuance announcement. In the February commentary explaining that outlook, Moody’s said no other hyperscaler is as leveraged or as cash-flow negative entering this build phase, and that leverage “will increase materially in the near term and could approach 5x temporarily.” Public reporting through early October 2026 still describes the rating as Baa2/negative; no subsequent downgrade has been reported. [4] [3] [5] [6]

Fitch is the most stable of the three. It affirms BBB / F2, outlook stable. That was the stance on October 13, 2025, and again on February 2, 2026 when it rated a new senior-notes deal BBB and reaffirmed the IDR. Fitch treats the AI capex as tied to multi-year contracts (OpenAI, xAI, Meta, Nvidia) that it expects to be repaid inside the contract window, with EBITDA leverage near or above its 3.5x sensitivity in fiscal 2026 and then declining in fiscal 2027–28 as AI compute revenue arrives. It has forecast deeply negative pre-dividend free cash flow (over $11 billion in both fiscal 2026 and 2027 in the October 2025 note; later commentary cited over $26 billion and $18 billion). [7] [8] [9] [10]

Fitch negative-rating sensitivities (February 2026 action):
- EBITDA leverage sustained above 3.5x, or lease-adjusted (EBITDAR) leverage sustained above 4x.
- (Cash flow from operations minus capex) / debt sustained below 15%.
- A shift away from the publicly disclosed balanced debt-and-equity funding mix for calendar 2026.
- AI compute revenue failing to materialize in the first half of fiscal 2027.
- Sustained revenue declines with EBITDA margins below 40%.

Upgrade would require EBITDA leverage sustained below 3.0x (or EBITDAR below 3.5x). [10]

The split matters for index mechanics. Major investment-grade indexes typically use the middle of the three ratings. With Moody’s and Fitch still at the BBB/Baa2 level and only S&P at BBB-, a single further cut does not automatically make Oracle a fallen angel. Market commentary has nonetheless focused on roughly $120 billion of bonds that could leave IG indexes if the ratings converge on junk—an analyst/market estimate, not an agency figure. Morgan Stanley credit analyst Lindsay Tyler has said two low-BBB ratings, possibly by calendar year-end 2026, is a live risk. [3] [11] [12]

What this means for anyone competing with or lending to Oracle: the rating is being held up by time and equity, not by current cash metrics. S&P has said on its own call that today’s credit metrics are not investment-grade and that the rating rests on cash harvest in years three to five of the AI contracts. Miss that path—or let leverage sit above 4.5x—and the next S&P move is to junk. [13] [14]

5-year CDS: from the 50s to a post-crisis high near 261 bp

Oracle’s 5-year CDS is the cleanest public price of that bet. The path over the past twelve months is a steady re-rating, then a break after the S&P cut.

• Late September 2025: Morgan Stanley’s recommended long-CDS entry was 57 bp. Around the same period, protection was still described as below roughly 40 bp earlier in the summer of 2025. [15] [16] [17]
• November 2025: above 105 bp (S&P data cited by Reuters); late November about 125 bp, a three-year high at the time (ICE). [18] [19]
• December 11, 2025: 139 bp, the highest in at least five years after an earnings miss (S&P Global Market Intelligence / Reuters). [20]
• Start of 2026: about 144 bp. [21] [21]
• July 20–21, 2026 (post-downgrade): about 203 bp, the highest in ICE data going back to late 2008, after a prior peak of 198 bp. Late July prints near 212–215 bp. [22] [23] [24] [25]
• August 24, 2026: year-to-date high then of 219.66 bp, having climbed from the 170s after the downgrade. [26]
• September 25, 2026: 232.41 bp (Yonhap Infomax), with a separate late-September print near 227 bp also called a record at the time, around the Project Jupiter force-majeure headlines. [26] [27]
• October 8–9, 2026: fresh highs near 257–261 bp. Multiple reports citing Bloomberg put the close at 261 bp, with an implied five-year default probability above 20%. IFR had 257 bp on the Thursday of that week. An October 8 market screenshot showed 250.5 bp. [28] [29] [30] [31]

Peak in the past 12 months, and the post-2008 high: about 261 bp in early October 2026. Current level (as of October 8–13, 2026): at or just off that peak, roughly 250–261 bp. Levels move daily; these are reported closes and intraday highs, not a single consolidated tape.

That is a roughly four- to five-fold widening from the mid-2025 entry Morgan Stanley used, and more than double the 2008-era reference some desks still cite near 198 bp. At 261 bp, insuring $10 million of Oracle debt costs about $261,000 a year.

Peers: Oracle is the outlier; CoreWeave is a different credit

The same AI-debt wave has lifted protection costs across tech, but the levels are not comparable.

Name	Approx. 5-year CDS	When reported	Context
Oracle	~203 bp, then ~261 bp peak	July 2026; early Oct 2026	BBB-/Baa2/BBB; negative FCF; OpenAI concentration
Meta	~95 bp (from ~56 at end of prior year); ~95 bp on July 30	Late July 2026	AA-tier ratings; heavy AI spend but still a strong cash generator historically
Alphabet	record ~64–67 bp (from ~50 when the contract became more active in March)	Late July 2026	FCF turned negative in one quarter; still high IG
Microsoft	~53 bp (from ~35)	Late July 2026	AAA / Aaa; has not issued bonds since 2017; CDS rose the least
CoreWeave	~855 bp in late July (implied ~50% five-year default odds); later back above 800 bp in early September after a dip to ~672	July–Sept 2026	Speculative-grade AI cloud; not an IG peer

[25] [25] [32] [33] [34] [35]

July 2026 was the moment peer CDS set records too—Meta near 92–95 bp, Amazon near 67 bp, Alphabet near 64 bp, Nvidia near 79–82 bp—while a basket of Oracle, Amazon, Alphabet, and Microsoft was cited around 75 bp, and the same basket excluding Oracle around 49 bp. By early October, Oracle and Broadcom (Broadcom 5-year CDS at a record 136 bp) were the names resetting highs on every financing headline. Credit analysts who have looked through the hyperscaler complex generally conclude the “exploding CDS” story is mostly an Oracle story: Microsoft, Alphabet, Amazon, and Meta still sit in AA–AAA territory with debt-to-equity well below 1x on reported balance sheets, while Oracle’s on-balance-sheet leverage and lease stack do not. [36] [37] [38] [39]

CoreWeave is the wrong comparison for rating analysis and the right one for “how far AI infrastructure credit can gap.” At 800-plus basis points the market is pricing distress odds, not a temporary IG leverage spike. Oracle at ~260 bp is expensive insurance for a BBB credit and cheap insurance relative to a pure-play GPU lessor.

Bond spreads and yields: the market has already downgraded the long end

Cash bonds have moved with the CDS, and the long end is where the cost of capital shows up.

• In July 2026, the spread on Oracle’s 6.7% bonds due 2056 widened about 8 bp to 263 bp; the 5.7% notes due 2036 widened about 9 bp to 205 bp. Ten-year Oracle yields were quoted around 6.4–6.5%, closer to BB than to the BBB index average. [23] [40] [41] [42]
• Around September 24, 2026, after the Project Jupiter force-majeure report, the 6.7% 2056s crossed an 8% yield for the first time. By October 8 they were quoted near 82 cents on the dollar, yield to maturity about 8.3%, G-spread about 268 bp. [11] [6] [29] [31]
• A Morgan Stanley note dated October 7, 2026 cited Oracle’s 10-year dollar bond yield at 7.5% alongside the CDS move from 57 bp to 260 bp. [15]
• As of early October, a 6.85% bond due 2066 was screening at roughly 8.45% yield to maturity (price about 82); a German venue showed a similar 2066 note near 8.7% yield at about 81 cents on October 12–13. Only Oracle and SpaceX, among the hyperscaler complex screened by one October 5 survey, had bonds yielding above 7.5%. [43] [44]
• MarketAxess noted that Oracle 30-year spreads had widened about 150 bp since the September 2025 $18 billion AI-infrastructure deal, and that the bonds were trading wide of liquid BB names (about 25 bp wide of Charter, 100 bp wide of Viatris) after having traded tighter than almost all of those comps in summer 2025. Bid-ask and daily volatility had also migrated toward high-yield behavior. [45]

Part of the yield is the Treasury backup—the 30-year Treasury was cited near 5.63% in early October, up about 39 bp in a month—but the Oracle-specific spread is the larger story. New-issue coupons in the mid-6s on 2025–26 deals are already stale relative to an 8% secondary yield on the long bond. [43]

CDS as the hedge for AI exposure

Analysts do not treat Oracle CDS as a bet that Oracle fails next quarter. They treat it as the most liquid way to short the credit leg of the AI capex boom.

Mechanism. Banks and direct lenders financing data-center construction loans—where Oracle is the future tenant, not always the borrower—buy Oracle CDS to hedge takeout and tenant risk. Morgan Stanley’s Lindsay Tyler and David Hamburger have argued that those construction-loan hedges, more than traditional bondholders alone, became a primary driver of CDS demand from late 2025 onward. When loans are slow to syndicate, the hedge stays on. A Bloomberg-reported $38 billion construction financing for Texas and Wisconsin sites leased to Oracle was still being distributed more than six months later, with some banks exploring significant risk transfers because internal AI-exposure limits were binding. [19] [46] [47]

Who is using it.
- Morgan Stanley credit has been structurally long Oracle 5-year CDS since a 57 bp entry on September 28, 2025. By October 2026 the same trade was marked near 260 bp. The October 7 note still recommends buying 5-year CDS and selling the 2035 and 2055 bonds, on the view that cash funding needs and lease liabilities keep deteriorating, and that lender hedging will keep CDS bid. An earlier shift (November 2025) dropped the long-bond leg of a basis trade and went outright long CDS because of the funding gap, balance-sheet growth, capex obsolescence, ratings pressure, and counterparty risk. They had warned CDS could clear 150 bp and approach 200 bp if financing communication stayed thin; both levels were exceeded. [16] [17] [15]
- Goldman Sachs’ credit desk, per Bloomberg as relayed in early-October market reports, said single-name AI CDS volumes were up about 400% year over year, with Oracle the most active name. [29]
- Thematic and macro accounts use Oracle because it is the widest liquid IG tech CDS and the name with the most fallen-angel optionality. Net notional CDS on major tech names was reported at a record $12.5 billion in July 2026, up about 500% since Q2 2025, with Oracle alone about $6.5 billion (LSEG data cited via the Financial Times). [21] [21]
- Protection sellers exist on the other side. In November 2025, Boaz Weinstein’s Saba Capital was reported to have sold CDS on Oracle, Microsoft, Meta, Amazon, and Alphabet to banks that wanted the hedge—evidence that the product had become a two-way market for AI credit risk, not a one-way panic. [18]

Why Oracle, not Microsoft or Alphabet. Microsoft can point to positive free cash flow and AAA ratings; its CDS barely cleared 50 bp even as issuance anxiety peaked. Alphabet and Meta widened, but from a low base and with ratings that do not threaten index exclusion. Oracle combines the largest relevant CDS market, negative free cash flow (about $23.7 billion in fiscal 2026), debt on the order of $125–130 billion, a backlog in which OpenAI is widely described as roughly half of remaining performance obligations (total RPO figures cited around $638–664 billion), and an S&P rating one notch from junk. That is why every new financing headline—bond deal, chip-lease SPV talks with Apollo and Goldman, force majeure on a New Mexico campus—has widened Oracle CDS rather than tightened it. Chip-lease SPVs may keep some debt off the parent’s face balance sheet; Morgan Stanley’s point is that lenders still hedge the parent, so the CDS still widens. [22] [48] [49] [16]

Lisa Shalett, CIO at Morgan Stanley Wealth Management, put the market’s heuristic bluntly in late 2025: the opening screen was Oracle CDS, because if investors start doubting Oracle’s ability to pay, that is an early read on nerves about the whole debt-financed AI trade. [50]

What this does to Oracle’s cost of capital

The transmission is direct. Oracle’s incremental dollar of AI capacity is funded at a spread the agencies have not fully marked into the rating, but the new-issue market will.

• All-in borrowing cost has stepped up. Recent long bonds were issued with coupons in the mid-6% area. Secondary long yields above 8%, and a cited 10-year yield of 7.5%, mean the next unsecured deal clears wider unless spreads reverse. S&P’s own base case still has a fiscal 2027 free-cash-flow hole near $42 billion against capex of $90–95 billion, so Oracle cannot wait out the market. Management has guided to roughly $40 billion of debt and equity funding in fiscal 2027, including a $20 billion common-stock program, after about $43 billion of debt and $5 billion of equity in fiscal 2026. [2] [22] [51] [15]
• Fallen-angel optionality is already in the price. Bonds trading through many BB comps, and a 2056 yield above the average single-B yield in some market commentary, mean IG buyers are demanding a high-yield concession today. If Moody’s outlook converts to a downgrade or Fitch’s 3.5x leverage tripwire is treated as sustained, the technical selling from index accounts would widen that concession further. S&P has already said another cut follows leverage sustained above 4.5x or a loss of confidence that free cash flow turns positive by fiscal 2029. [45] [1] [3]
• Equity is the pressure valve, and it is not free. The February 2026 mandatory convertible preferred ($5 billion) and the planned common issuance are what kept S&P’s leverage forecast from the high-4x area and what Moody’s cited when it affirmed rather than cut. Dilution protects the rating and therefore the debt cost, but it raises the equity cost of the same AI projects. That is a different tradeoff than Microsoft funding fiscal 2027 AI capex from free cash flow, or Alphabet and Meta issuing at spreads a fraction of Oracle’s. [1] [4] [52]
• Off-balance-sheet structures do not fully escape the CDS. Lease commitments that have not yet started have been reported in the high hundreds of billions (one September 2026 figure: $288 billion of mostly data-center leases not yet commenced, on top of $125 billion of borrowings). Chip-lease SPVs with loan-to-cost above 50%, if they close, may reduce parent bond supply. They do not stop lenders from buying Oracle CDS, and rating agencies have said leases reduce financial flexibility because the assets cannot be sold or pledged. Delays concentrate the problem: Morgan Stanley has warned that a Wisconsin power delay into mid-2028 could bunch capex with other campuses and with the refinancing of an Abilene construction loan, so the funding need hits in a short window precisely when the credit spread is already near high-yield levels. [48] [29] [5] [15]
• Relative cost is the competitive point. At ~50–70 bp, Microsoft and Alphabet can add a dollar of AI capacity without the capital structure becoming the story. At ~260 bp CDS and 8% long yields, Oracle’s hurdle rate on the same GPU-hour is higher before a single dollar of OpenAI revenue is collected. If contracted revenue slips—OpenAI annualized revenue was reported in early October well short of earlier figures circulated in the market—the debt service does not slip with it. That asymmetry is why the credit market is the binding constraint on Oracle’s AI strategy, and why its CDS has become the hedge for everyone else who does not want to underwrite that constraint. [49] [28] [31]

Bottom line for capital providers and competitors: Oracle can still issue, and management has said it intends to stay investment grade. The price of that paper is no longer a mid-BBB price. Until free cash flow inflects—or equity and customer prepayments do the deleveraging the agencies are underwriting—the marginal cost of Oracle’s AI capacity will keep being set in the CDS and the long bond, not in the rating letter.

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Recent Findings Supplement (October 2026)

S&P downgraded Oracle to BBB- (lowest investment-grade notch) on July 9, 2026, with a stable outlook, citing accelerated AI infrastructure risks and cash flow strain; Moody’s holds Baa2 with negative outlook; Fitch maintains BBB stable.[1][2]

S&P’s action reflected heightened business risk from the AI buildout (including customer concentration, with OpenAI representing roughly half of Oracle’s $638 billion contractual backlog), sharply higher capex forecasts ($90–95 billion for FY2027, up from a prior $60 billion estimate), and a projected free operating cash flow (FOCF) deficit of nearly $42 billion in FY2027. Adjusted leverage is expected to reach the mid-4x area in FY2027 (improved from prior forecasts partly due to a $5 billion mandatory convertible preferred issuance in February 2026 and planned equity raises), exceeding S&P’s typical 4x threshold for BBB. The stable outlook assumes scaling AI capacity will eventually generate cash flow in years 3–5 of contracts, with deficits funded via debt and equity mixes. S&P explicitly noted Oracle (alongside SpaceX) as an “outlier” for investment-grade status despite current metrics not fully supporting it.[3][4][5]

Moody’s negative outlook (in place since at least February 2026 and referenced in August 2026 commentary) highlights Oracle’s leveraged position entering the AI build phase relative to peers, with potential temporary leverage approaching 5x. Fitch affirmed BBB/F2 with stable outlook in February 2026 (still referenced as current in October 2026 materials), noting elevated near-term capex but expected leverage decline in FY2027–2028 as AI revenue scales; its triggers include sustained EBITDA leverage above 3.5x (or above 4x including rents). No further agency actions have been reported since July 2026.[6][7]

Oracle’s 5-year CDS has widened dramatically to record levels of ~260–261 bps as of early October 2026 (implying >20% 5-year default probability), up from ~144 bps early/mid-2026 and ~200+ bps in July 2026; this is the widest among major tech/AI peers.[8][9]

Recent peaks reflect successive financing announcements, S&P’s downgrade, data center execution concerns (e.g., force majeure notice on the New Mexico Project Jupiter site in September 2026), and broader AI capex anxiety. Earlier points in the 12-month window included ~57 bps levels referenced in Morgan Stanley trading notes (around late 2025 entry). Peers as of July–October 2026 snapshots: Broadcom at record 136 bps; Nvidia ~80–87 bps (record near 82 bps in July); Meta ~86 bps; Alphabet ~62 bps; Microsoft ~51 bps. Oracle stands out as the most stressed. CoreWeave (a smaller AI infrastructure peer rated in the BB-/B+ range) saw its own CDS spike sharply (e.g., ~855 bps / ~50% implied default probability in July 2026), though direct apples-to-apples comparisons are limited.[10][11][12]

Bond spreads and yields have widened sharply in tandem, with Oracle’s longer-dated paper (e.g., 6.7% due 2056) trading above 8% yield for the first time and 10-year yields around 7.5% by October 2026; spreads now trade wide to many BB names.[13][9]

Yields on 30-year bonds widened ~150 bps since September 2026 amid heavy issuance and rising Treasury yields. This reflects market pricing of near-junk credit risk despite the IG ratings, with increased volatility, wider bid-ask spreads, and higher trading volumes in both bonds and CDS. AI-linked debt issuance across tech has been massive (~$500 billion in 2026 per some estimates), amplifying scrutiny.[8]

Analysts view the CDS widening primarily as hedging against concentrated AI execution and financing risks rather than outright default fears, with Morgan Stanley actively recommending long CDS positions.[9]

Morgan Stanley (October 2026 research) highlights lender hedging, basis trades, and shorts as drivers, alongside structural concerns like potential 2028 capex concentration (power/infrastructure bottlenecks could delay revenue while large construction loans mature) and customer concentration risks. High single-name AI CDS volumes (Oracle often leading, with Goldman noting 400% YoY surge in such trading) indicate investors using CDS to hedge capex burn, negative FCF periods, and uncertain payback on multi-year contracts. This is distinct from equity optimism around backlog growth.[14]

Implications include materially higher Oracle cost of capital, potential “fallen angel” index exclusion risk on any further downgrade (~$120 billion in bonds could be impacted), and pressure toward equity raises, SPV structures (e.g., chip-leasing vehicles), or customer prepayments to bridge funding gaps.[15]

With ongoing multi-billion-dollar annual financing needs, wider spreads directly raise incremental borrowing costs and could constrain flexibility if leverage metrics deteriorate further. Peers with stronger balance sheets (e.g., Microsoft, Alphabet) face milder pressure, highlighting Oracle’s relative vulnerability in the AI infrastructure race. No major new rating or CDS data has emerged in the immediate days before October 13, 2026.