Source: Fortune
Summary
Oracle’s fiscal third quarter earnings are expected to show a 20% growth in revenues to $17 billion, but the company’s heavy borrowing and negative free cash flow have raised concerns. Oracle has disclosed a restructuring plan that includes job cuts, and the company has turned to bonds to raise capital, finishing its last fiscal year with $92.6 billion in total debt outstanding. Co-CEO Clay Magouyrk has reassured investors about the company’s additional capital needs, but Moody’s rates Oracle Baa2, which is two notches above junk. The company’s capital expenditures are soaring as it builds more data centers and infrastructure for AI.
Our Reading
The numbers tell one story. Oracle’s earnings growth is expected to be up 16% to $1.71, but the company’s debt and negative free cash flow are raising red flags. The company’s restructuring plan includes job cuts, which Bloomberg reported could impact thousands of employees. Oracle’s capital expenditures are soaring as it builds more data centers and infrastructure for AI, with the company guiding its capex to be $50 billion this fiscal year. Meanwhile, its operating cash flow grew from $18.7 billion in fiscal 2024 to $20.8 billion in fiscal 2025. The company’s transformation into a cloud infrastructure provider is underway, but the costs are adding up.
Oracle’s debt and negative free cash flow are the new normal.
Author: Evan Null
