Oracle Corp. ?s recently announced five-year growth plan for its Oracle Cloud Infrastructure (OCI) business and a massive jump in total remaining performance obligations indicate that capital spending will ramp up significantly over the next several years. Growth prospects are strong, but risks include potential data center overcapacity should AI compute demand slow over time, customer and supplier concentration risk, and still evolving competitive landscape. We expect S&P Global Ratings-adjusted leverage will rise beyond the 4x area and the free operating cash flow (FOCF) deficit will worsen over the next two to three years as Oracle accelerates hardware purchases and enters into new data center leases. We affirmed all our ratings on Oracle, including the ?BBB? long-term issuer credit rating.
