Oracle delivered its weakest fiscal third-quarter performance since 2021, erasing nearly all of the gains recorded during the spring and summer rally. Earlier this year, the company reported record levels of remaining performance obligations (RPOs), driven largely by new AI data-center contracts, only to see investor enthusiasm collapse when quarterly results failed to meet the elevated expectations set by those contracts.

Unlike peers that rely on third-party financing, Oracle has retained direct responsibility for funding its AI and data center build-out. As of its latest filing, the company carried over $450 billion in RPOs tied to AI infrastructure, including a multiyear commitment to a leading generative-AI provider. This exposure contributed to negative free cash flow in the quarter and prompted a noticeable widening in credit default swap spreads on Oracle’s debt.

Market participants have raised questions about Oracle’s willingness to carry all infrastructure risk internally when other major cloud providers appear more selective with incremental data-center investments. Analysts point out that if demand for AI slows or margins prove thinner than projected, Oracle would face both earnings pressure and potential asset write-downs, tightening coverage ratios and reducing financial flexibility.

Despite short-term setbacks, over two dozen Wall Street analysts maintain a favorable view on Oracle, citing its entrenched position in enterprise software and a rebounding AI narrative early next year. Key forecasts include a rebound in free cash flow once data-center capacity ramps and continued expansion of recurring cloud revenue, factors that could drive renewed investor confidence provided Oracle can sustain its investment-grade credit rating.