Morgan Stanley analysts are sounding the alarm over Oracle's data center delays, which could significantly impact its financial health. The firm's credit analysts, Lindsay Tyler and Benjamin Guerrero, argue that delays in key projects like the 1.3GW 'Project Lighthouse' in Wisconsin are not just about construction timelines but also about delayed revenue and cash flow. For a company with over $600 billion in future revenue tied to AI data centers, any delay in monetization could jeopardize its entire investment case.
The Wisconsin campus, one of two Vantage campuses being built for Oracle to lease, faces significant hurdles. While the physical structures are being erected, the site lacks the necessary power infrastructure. The Wisconsin Public Service Commission (PSC) revoked its approval for new transmission lines, forcing Oracle to refile its application. Morgan Stanley estimates that meaningful load could be available as late as mid-2028, far beyond Oracle's initial guidance of the second half of 2027.
The delays are not isolated to Wisconsin. At Oracle's Jupiter campus in New Mexico, the lack of a pipeline has led to the consideration of hauling compressed natural gas by truck, a far more expensive option. This situation has raised concerns about the financial strain on Oracle, with its credit default swap (CDS) rate hitting a record 261bps, indicating a more than 20% chance of default over the next five years.
Analysts argue that the delays are not simply about capital expenditures being postponed. Instead, they point out that the delays could result in a more concentrated cash flow impact, with multiple buildings ready for use at once. This could strain Oracle's balance sheet and affect its ability to secure future funding. The risks extend beyond just construction delays, as the uncertainty around contractual terms and customer behavior could further complicate Oracle's financial outlook.