Oracle Corp.

Overview Key strengths Key risks Leading position in database and application software and a key vendor for large enterprises. Powerful founder creates risk of aggressive acquisitions and shareholder returns. Products are deeply embedded in customers? operations, making switching costs and risks high. Public cloud providers are growing their share of enterprise IT spending faster than the company. Investment-grade market access likely necessary to manage its large capital structure and 3.5x gross leverage target both lower downgrade risk. Increasing capital spending on cloud and artificial intelligence (AI) infrastructure. Fiscal 2026 (ending May 2026) goals create room for the company to achieve its leverage target and resume share buybacks. AI could be a risk if it lowers switching costs and risks. Oracle

...Oracle Corp.'s 3.5x gross leverage target is critical for the rating. Oracle Corp. defined its target in November 2022 following years of deploying excess cash to shareholders and executing leveraged share buybacks after the 2017 U.S. tax reform made foreign cash available. A series of downgrades ensued after the rating reached a peak of '##-' prior to the reform. We estimate Oracle's management-defined gross leverage at 3.3x (similar to its S&P Global Ratings- adjusted net leverage). Management has not yet acknowledged this milestone, so we believe it may be adhering to a more conservative definition of the metric. Whenever it determines it has...

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