Raimo's Roundup: Checking On Software Debt Situation Given Higher Interest Rates

With increasing interest rates, debt is back in focus. For most vendors this should not be an issue, however there are exceptions. This note gives a detailed overview of total debt levels, leverage, floating rate exposure, outstanding converts and maturity considerations for Barclays' U.S. Software coverage. Oracle, IBM, Microsoft and CoreWeave have the highest absolute net debt levels, driven by AI build-out investments (ORCL, MSFT, CRWV) and M&A (IBM). WhiteFiber and CoreWeave are the only vendors operating above 3x net debt/adj. EBITDA, reflecting AI data center expansion; their leverage ratios appear distorted near term due to the timing gap between CapEx and revenue recognition given lower EBITDA bases and rapid capacity expansion. Total debt levels will continue to increase for the foreseeable future, raising the bar on execution in a rising rate environment. The maturity schedule is not overly dramatic, particularly for the rest of this year;