S&P Flags OpenAI as Oracle’s Biggest Credit Risk After Downgrade
S&P downgraded Oracle to BBB- and named OpenAI as a key credit risk, estimating it accounts for ~50% of Oracle's $638B in remaining performance obligations.
Credit rating agency S&P Global Ratings has downgraded Oracle's long-term credit rating from BBB to BBB-, and named OpenAI as a "key credit risk" for the company. S&P estimates OpenAI makes up roughly half of Oracle's $638 billion in remaining performance obligations, meaning a failure by OpenAI to meet its financial commitments could leave Oracle holding expensive data centre leases with no reliable tenants. Oracle has lost around $498 billion in market value in less than 10 months as its aggressive AI infrastructure push draws scrutiny.
What happened
| Metric | Detail |
|---|---|
| Oracle credit rating (new) | BBB- (down from BBB) |
| Oracle market value lost | ~$498 billion in under 10 months |
| Oracle remaining performance obligations (RPO) | $638 billion total |
| OpenAI share of Oracle RPO | ~50% |
| Oracle capex guidance, fiscal 2027 | $90-95 billion (S&P’s prior estimate: $60 billion) |
| Free operating cash flow deficit, fiscal 2027 (S&P estimate) | ~$42 billion (prior forecast: -$24 billion) |
| Oracle cloud infrastructure share of revenue, fiscal 2026 | 27% |
| Oracle cloud infrastructure share of revenue, fiscal 2028 (S&P projection) | ~60% |
S&P Global Ratings cut Oracle’s long-term credit rating one notch to BBB- on July 25, 2026. The agency said it had underestimated both the scale of Oracle’s AI investments and the financial risk those investments carry. Unlike Oracle’s traditional software business, AI infrastructure requires enormous capital spending on data centres, chips, and long-term leases well before any revenue materialises.
At the centre of the concern is OpenAI. S&P says the ChatGPT maker represents around half of Oracle’s $638 billion RPO. RPO is the total value of contracted future revenue a company has not yet recognised, so a large RPO sounds positive until you consider what happens if the customer cannot pay.
Why does OpenAI concentration worry S&P?
S&P said OpenAI’s ability to honour its contracts depends on three things: continued growth in the broader AI market, OpenAI’s ongoing ability to raise external funding, and whether its models stay competitive. All three are variables, not certainties.
“If OpenAI were unable to pay Oracle, we believe Oracle could be left with massive data center leases that it might be unable to exit or have to re-lease to new tenants under less-favorable terms,” S&P wrote in its report.
To monitor the situation, S&P says it is tracking OpenAI’s financial commitments to data centre operators and chip makers as a proxy for OpenAI’s overall financial health and market position.
Why it matters
Oracle’s bet on AI infrastructure is a concentrated one. S&P expects cloud infrastructure to grow from 27% of Oracle’s revenue in fiscal 2026 to nearly 60% by fiscal 2028. That shift means Oracle’s financial profile becomes more and more dependent on the AI market staying hot and on a single anchor customer staying solvent.
The capex numbers are stark. Oracle guided $90-95 billion in capital expenditure for fiscal 2027, roughly 58% above S&P’s earlier $60 billion estimate. The resulting cash flow hit is significant: S&P now projects a free operating cash flow deficit of nearly $42 billion in fiscal 2027, compared to its prior forecast of negative $24 billion.
For businesses and developers watching the AI infrastructure market, this is a reminder that the supply side of AI compute carries real financial exposure. The companies building and leasing the data centres that power tools like ChatGPT are taking on concentrated customer risk in a market that has not yet proven sustainable unit economics. Coverage of similar dynamics is tracked across our AI news section.
Our take
S&P’s report is a sober read in a space full of optimistic projections. The core problem is straightforward: Oracle signed massive, long-duration contracts with a customer whose own revenue model is still maturing. OpenAI spends heavily, raises frequently, and competes in a market where model leadership can shift in months. Tying half of $638 billion in contracted obligations to that single counterparty is a structural risk, regardless of how bullish you are on AI.
For businesses evaluating AI integration or choosing cloud vendors, this kind of concentration risk at the infrastructure layer is worth watching. If Oracle’s financial position tightens, it could affect pricing, capacity availability, or the terms on which it competes for enterprise cloud deals. None of that is imminent, but BBB- is one notch above junk territory, and the cash flow trajectory S&P describes leaves little room for error.
The broader lesson: the AI boom is generating real revenue commitments, but those commitments are only as solid as the companies making them.
Frequently asked questions
Why did S&P downgrade Oracle's credit rating?
S&P lowered Oracle's long-term credit rating from BBB to BBB- because it underestimated the scale of Oracle's AI infrastructure investments and their impact on the company's financial profile. Oracle's capex guidance of $90-95 billion for fiscal 2027 was far above S&P's earlier $60 billion estimate.
Why is OpenAI a credit risk for Oracle?
S&P estimates OpenAI accounts for roughly 50% of Oracle's $638 billion in remaining performance obligations. If OpenAI cannot meet its financial commitments, Oracle could be left holding large data centre leases it cannot exit or re-lease on favourable terms.
How much has Oracle's market value fallen?
Oracle has lost approximately $498 billion in market value in less than 10 months, according to the Times of India report published July 25, 2026.
What is Oracle's expected cash flow deficit in fiscal 2027?
S&P now expects Oracle's free operating cash flow deficit to reach nearly $42 billion in fiscal 2027, up from its previous forecast of negative $24 billion, driven by heavy AI infrastructure spending.
