Oracle and Amazon Face Financial Pressure Amid Rising Interest Rates Ahead of Upcoming Fed Meeting
Both Oracle (ORCL) and Amazon (AMZN) are facing significant financial strain due to rising interest rates as they invest heavily in AI data centers. Oracle's cloud infrastructure, OCI, grew by 93% year-over-year but resulted in negative free cash flow of $23.69 billion for FY2026. The company plans to raise approximately $40 billion through debt and equity in FY2027 to fund a $70 billion capital expenditure plan. Amazon's AWS revenue increased by 37% year-over-year, but its free cash flow turned negative at -$7.6 billion due to rising capex of nearly $54.2 billion for Q2 alone. With the Fed Funds rate at 3.75% and a 10-year Treasury yield of 4.78%, financing these expansions is becoming increasingly expensive, making Oracle particularly vulnerable given its reliance on legacy software cash flow compared to Amazon's diversified revenue streams from retail, ads, and subscriptions. The upcoming Federal Reserve meeting adds uncertainty for both companies as they await potential rate adjustments that could ease their financial burdens or force further equity dilution. Amazon’s CFO has acknowledged the need to issue debt this year while Oracle is already carrying $218.7 billion in liabilities.
Topics: AI datacenters capital expenditures cloud computing Fed interest rates free cash flow