Fitch Ratings downgraded the long-term issuer default ratings of Oracle Corp. to A from A+ and gave a negative ratings outlook.

The rating agency said Oracle's gross leverage will remain high for an extended period as the company adjusts its capital structure post U.S. tax reform.

The negative outlook reflects the risk that the company may elect to delay debt reduction to levels consistent with the 'A' rating category. Despite the high gross leverage, Fitch expects Oracle's strong operating profile to sustain with an annual free cash flow of over $10 billion. Fitch also expects Oracle to have ample liquidity to address debt maturities.

Although the company has yet to lay out its financial policy or relay the allocation of significant levels of excess cash, the rating agency expects its gross leverage to decline with debt maturities and to less than 2x by fiscal year 2022.

Fitch believes the company would limit share repurchases in the event of large acquisitions. It also expects the company to seek external financing for its acquisitions. The company acquired NetSuite, a provider of cloud applications, on Nov. 7, 2016, for $9.1 billion. Fitch believes similarly sized deals are likely.

Given the lack of financial targets such as ceilings on share repurchases, the negative outlook indicates the risk that Oracle might choose to maintain or raise its gross debt levels.

Unexpected deterioration in the company's operating profile would also have consequences on Oracle's credit protection metrics.

However, the rating agency said Oracle enjoys sufficient financial flexibility owing to its strong balance sheet and cash generation capabilities. Fitch also highlighted the company's strong competitive position, significant recurring revenue and significant shareholder returns. Fitch believes the customer and product diversification that comes with scale will strengthen Oracle's operating profile.