Oracle’s $130 Billion Debt Load Turns a 64% Stock Rout Into a Credit Crisis

Oracle shares hit 52-week low amid credit downgrade and negative free cash flow, while Ellison's personal guarantee for Paramount Skydance-WBD merger faces court challenge.

The numbers are brutal by any measure. Oracle shares closed at €101.20 on Friday, shedding 4.08% in a single session and brushing against a fresh 52-week low of €101.06. From the September 2025 peak, the stock has cratered nearly 64%. But what makes this sell-off different from a garden-variety tech correction is the debt that sits behind it — and the personal fortune of founder Larry Ellison that’s now intertwined with one of the most contested media mergers in history.

The Ellison Guarantee That Ties Everything Together

Larry Ellison personally guaranteed $40.4 billion of the equity financing for Paramount Skydance’s planned $110 billion takeover of Warner Bros. Discovery — a deal involving his son’s company. The Ellison Family Trust has backstopped that with a $45.7 billion equity guarantee, secured against roughly 1.16 billion Oracle shares. Those shares are now worth about half what they were when the guarantee was written.

Twelve state attorneys general have gone to court to block the merger, arguing that combining two of the top five studios would stifle competition in theatrical distribution and cable licensing, ultimately raising prices for consumers. A hearing on a preliminary injunction is scheduled for August 3, 2026. The Justice Department already approved the deal in June, but the legal challenge introduces a layer of uncertainty that directly threatens the collateral underpinning Ellison’s guarantee.

If the merger collapses, Paramount faces a $7 billion regulatory exit fee — on top of the $2.8 billion breakup fee already paid to Netflix. And if the deal drags past September 30, 2026, a ticking fee of $0.25 per share per quarter kicks in.

A Credit Downgrade That Changes the Calculus

The legal drama around the media deal is unfolding against a deteriorating credit picture at Oracle itself. S&P Global Ratings cut the company’s credit rating to BBB- this month — just one notch above junk — citing the relentless capital demands of its cloud infrastructure buildout.

Oracle spent $55.7 billion on capital expenditures in fiscal 2026, most of it funneled into data centers for its cloud business. Operating cash flow hit a record $32 billion, up 54%, but that wasn’t enough. Free cash flow was negative $23.7 billion. Total debt is now approaching $130 billion.

The company plans to raise roughly $40 billion in debt and equity this fiscal year, including a $20 billion stock placement that will dilute existing shareholders. That’s a lot of fresh paper hitting the market at a time when the stock is plumbing new lows.

The Operational Story Is Still Alive — Barely

None of this means the underlying business is broken. Revenue rose 17% to $67.4 billion in fiscal 2026, with growth accelerating to 21% in the fourth quarter. The cloud infrastructure unit was the standout, posting 77% growth for the full year and 93% in Q4 alone, generating $5.8 billion in quarterly revenue. Remaining performance obligations hit $638 billion at year-end, swelling by $85 billion in the final quarter.

The bull case rests on that backlog. The average analyst price target of $255.57 implies 116.5% upside from Friday’s close. Targets range from $155 to $400, reflecting deep disagreement about how much the financing risk should discount the backlog.

CLSA recently issued a hold rating with a target well below the consensus, arguing that the capital requirements for the AI cloud push will far exceed what’s currently priced in. The rating agency’s downgrade reinforces that view: higher debt service costs and the potential suspension of buybacks are second-order effects that no oversold RSI reading can fix.

Technicals Say Oversold, Fundamentals Say Cautious

The 14-day relative strength index sits at 27.6 — textbook oversold territory. The stock trades 31.64% below its 50-day moving average and 36.43% below its 200-day average. A technical bounce wouldn’t surprise anyone.

But the New Mexico data center project, valued at $16.5 billion, is stuck in regulatory limbo over environmental permitting, forcing Oracle into expensive fuel-cell alternatives. A class-action lawsuit alleging misleading statements about AI investment returns adds another layer of legal noise.

With annualized volatility at 43.81% and the stock barely above its 52-week low, the path ahead looks choppy in both directions. The bull case isn’t dead — the backlog is real, and the cloud growth trajectory is intact. But the credit downgrade has fundamentally altered the risk-reward equation. Oracle now has to prove it can finance its AI ambitions without further rating erosion. Until it does, the stock’s cheapness looks less like an opportunity and more like fair compensation for a balance-sheet risk that isn’t going away.