Oracle Cut 21,000 Jobs to Fund AI: Now Its Biggest Project Faces a $7 Billion Obstacle

Oracle cut 21,000 jobs by the end of fiscal year 2026 to fund AI infrastructure, but its planned 1-gigawatt data centre in Wisconsin faces a $7 billion obstacle after the Public Service Commission of Wisconsin refused to ease financial collateral requirements. The S&P Global downgraded Oracle to BBB-, just above junk status, forcing the company to provide over $7 billion in cash collateral or a letter of credit to connect to the power grid, with ongoing maintenance costs of $100 million annually. Analyst David Desjardins warned that Oracle's success is totally dependent on OpenAI's performance, as 50% of Oracle's $638 billion in future contract volume comes from OpenAI alone.

Oracle Cut 21,000 Jobs to Fund AI: Now Its Biggest Project Faces a $7 Billion Obstacle Oracle faces higher costs and funding challenges after a credit downgrade, with regulators refusing to subsidize its data centre investments Oracle is among several AI giants that trimmed its workforce significantly to rapidly fund the development of AI infrastructure. Tech giants are expected to collectively spend around $600 billion on AI infrastructure buildout in 2026. Oracle continues to retain its position as a primary provider of computing power after entering a contract with OpenAI to supply $300 billion in compute over five years, starting in 2027. However, building the data centres is resulting in a severe cash squeeze. The company took extreme efficiency measures, including downsizing its workforce by 21,000 https://www.ibtimes.co.uk/oracle-ai-job-cuts-restructuring-1804675 by the end of fiscal year 2026 to 141,000 workers from 162,000 amid AI integration to free up cash flow. Now, the company's planned 1-gigawatt data centre in Wisconsin to supply compute to OpenAI is facing regulatory challenges after the Public Service Commission of Wisconsin refused to ease financial collateral requirements, designed to make sure private energy consumers are not compelled to bear the costs in case of a facility closure. A data centre operator with an S&P credit rating below A- must provide collateral covering the electrical infrastructure. Note that the S&P Global recently downgraded Oracle to BBB-, which is just above junk bond status. When a public firm's credit rating is downgraded to junk status, its borrowing costs increase, and the stock price generally tanks as institutional investors avoid junk bonds, ultimately reducing the company's access to funding. The credit rating agency https://www.ibtimes.co.uk/oracle-ai-ambitions-threatened-credit-downgrade-openai-dependency-1809001 noted that Oracle's 'growing AI infrastructure business is diluting its strong business risk profile.' As a result, Oracle must provide cash collateral or a letter of credit of over $7 billion simply to connect the data centre to the power grid, whose ongoing maintenance costs are expected to be $100 million annually. Oracle petitioned the court against the requirement, arguing that these financing costs would impact future investment in the state, while emphasising its commitment to the project, valued at about $15 billion. However, regulators clarified that existing customers should not subsidize data centres. Oracle Highly Dependent on OpenAI's Success In recent times, Oracle has been securing loans aggressively to build data centres, while positioning itself as a data centre compute provider. However, the credit downgrade could pose a serious problem in terms of raising more money in the future. The company spent $55.7 billion on its data centre buildout in fiscal 2026, with spending expected to grow by 70% to $90 billion in fiscal 2027. The company's capex in 2024 was $6.9 billion, while its cash flow stood at a positive $11.8 billion. However, cash flow turned negative in fiscal 2026 to $23.7 billion, indicating that the company's balance sheet is deteriorating at an alarming rate. According to analyst David Desjardins, Oracle's success could be totally dependent on OpenAI's performance. OpenAI relies on capital markets remaining open to help meet its rising financial obligations, but if it faces any hurdles in raising money, the situation could drive Oracle towards 'the eye of the storm.' Oracle plans to raise another $40 billion through a debt-equity mix to advance its infrastructure buildout, but Desjardins continues to worry more about the company linking its entire future to a single-high-stakes client. According to filings with the US Securities and Exchange Commission, Oracle has about $638 billion in future contract volume on its books, with 50% of that from OpenAI alone. Even the S&P views Oracle's dependence on OpenAI as a major issue, describing OpenAI as a 'central credit risk' for Oracle. © Copyright IBTimes 2025. All rights reserved.