NEW YORK, July 20, 2026 – Oracle Corporation (NYSE: ORCL) faces a significantly higher dilution cost as its share price has dropped 63% from its 52-week high. The company's proposed $20 billion at-the-market equity offering would now require issuing approximately 158 million shares, representing 5.5% of its outstanding shares, compared to just 58 million shares (2.0%) at the peak price of $345.72.
Shares were set to open Monday at $125.28, down 0.9% from Friday's close of $126.41. The stock hit a 52-week low of $121.50 during Friday's session, though it recovered 1.8% for the day. Over the past week, Oracle shares declined roughly 10%.
Cash Flow Challenges and S&P Downgrade
S&P Global Ratings downgraded Oracle's credit rating to BBB- on July 9, placing it just one step above speculative grade. The agency projects Oracle's free cash flow shortfall for fiscal 2027 will approach $42 billion. S&P expects adjusted leverage to remain above 4x for at least two years, citing the company's massive capital expenditures.
In fiscal 2026, Oracle reported revenue of $67.4 billion, up 17% year-over-year, with cloud infrastructure revenue surging 93% in the fourth quarter to $5.8 billion. However, capital expenditures totaled $55.7 billion, consuming 83% of annual revenue. Operating cash flow reached $32.0 billion, while free cash flow was negative $23.7 billion, a negative 35% margin.
Backlog and AI Contracts
Oracle's remaining performance obligations (RPO) soared to $638 billion, an increase of 363%. According to the company, $75 billion in significant AI contracts involve prepaid or customer-provided chips and hardware, a model expected to reduce Oracle's capital requirements. S&P estimates that OpenAI accounts for approximately half of the $638 billion backlog.
For fiscal 2026, Oracle secured $43 billion in debt and $5 billion through equity. The company anticipates obtaining about $40 billion in additional financing for fiscal 2027, including the already disclosed $20 billion at-the-market share initiative. Oracle stated it does not expect further debt issuance in calendar 2026.
Valuation and Outlook
At Friday's close, Oracle traded at 21.7 times trailing earnings. Based on management's early projection for fiscal 2027 adjusted earnings of $8.05 per share, the forward multiple stands at 15.7. Oracle forecasts fiscal 2027 revenue of $90 billion, representing growth of about 34%, with adjusted earnings rising 18% after accounting for one-time factors.
The sector faces its next test on Wednesday when Alphabet (NASDAQ: GOOGL) reports earnings after markets close on July 22. Alphabet's cloud revenue and capital expenditure outlook may influence investor views on Oracle's AI expansion.
Risks Ahead
Tyler Richey, technical analyst at Sevens Report Research, described the S&P downgrade as a 'canary in the coal mine' for equities. Key risks include Oracle's reliance on rapid backlog turnover, access to financing, and the capacity of major clients to meet payments. While prepaid hardware may help reduce cash demands, a lower issuance price would cause additional dilution. Investors are now looking beyond backlog growth as a sole measure of performance, focusing on Oracle's ability to finance expanded capacity without increasing dilution.
