Oracle Corporation (ORCL)

Interest coverage

		May 31, 2025	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	—	15,441,000	12,796,000	15,836,000	15,653,000
Interest expense	US$ in thousands	3,578,000	3,514,000	3,505,000	2,755,000	2,496,000
Interest coverage		0.00	4.39	3.65	5.75	6.27

May 31, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $3,578,000K
= 0.00

The interest coverage ratio for Oracle Corporation indicates fluctuations in its ability to meet interest obligations over the analyzed period. As of May 31, 2021, the ratio was 6.27, suggesting that the company's earnings before interest and taxes (EBIT) significantly exceeded its interest expenses, reflecting a strong capacity to service debt. By May 31, 2022, the ratio declined to 5.75, indicating a slight decrease in coverage but still maintaining a comfortable margin over interest obligations.

However, a notable decline occurred by May 31, 2023, with the ratio dropping to 3.65. This reduction suggests a decreased capacity to cover interest expenses with operating earnings, potentially signaling increased financial risk or a decrease in profitability. The trend continued into the subsequent year, with the ratio rising modestly to 4.39 as of May 31, 2024, implying some improvement in earnings relative to interest costs but still below earlier levels.

Looking forward, the interest coverage ratio is projected to fall sharply to zero by May 31, 2025, which indicates that operating earnings are expected to be insufficient to cover interest expenses, possibly due to anticipated earnings decline or increased interest obligations. This points toward a potential deterioration in Oracle’s financial flexibility and increased risk of default or need for refinancing.

Overall, the trend from 2021 through 2024 shows a decreasing interest coverage, reflecting a waning capacity to meet interest obligations, while the forecasted ratio of zero in 2025 signals a critical concern regarding the company's ability to sustain its debt service without additional earnings growth or financial restructuring.