Oracle Corp. saw a notable deterioration in its credit risk indicators after reporting fourth-quarter results, with key metrics reflecting increased financial strain despite revenue growth. The shift has prompted reassessment by institutional investors and credit analysts.
- Credit risk scores declined 18% quarter-over-quarter post-earnings
- Operating margin fell to 34.1%, down 2.4 ppt YoY
- Total long-term debt increased by $2.3 billion to $38.6 billion
- Leverage ratio rose to 3.8x EBITDA from 3.2x in prior quarter
- CDS spreads widened by 12 basis points following report release
- Interest coverage ratio dropped to 4.7x, down from 5.3x in Q3
Oracle Corp. experienced a sharp uptick in credit risk exposure following its fiscal Q4 earnings announcement on June 11, 2025. Credit risk scores, measured through internal risk models and third-party assessments, declined by 18% quarter-over-quarter, signaling weakening financial resilience. The company reported a 7.3% year-over-year revenue increase to $12.8 billion, driven by cloud services, but operating margins contracted by 2.4 percentage points to 34.1%, reflecting higher infrastructure and R&D outlays. The deterioration in credit metrics coincided with a $2.3 billion increase in long-term debt, bringing total leverage to 3.8 times EBITDA—up from 3.2 in Q3. Analysts noted that while the company maintained strong cash flow from operations at $4.1 billion, the rise in debt servicing obligations and declining interest coverage ratio to 4.7x raised concerns about future creditworthiness. The shift has prompted credit rating agencies to initiate reviews on Oracle’s investment-grade status, with speculation of potential downgrades if trends persist into FY2026. Market response was mixed: Oracle’s stock dipped 3.2% in after-hours trading, while credit default swap (CDS) spreads widened by 12 basis points, indicating elevated default risk perception. Institutional investors, including major pension funds and asset managers, began adjusting exposure to Oracle debt instruments, with some reducing holdings in the $5.8 billion senior unsecured note series maturing in 2032.