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Oracle's AI Bet: Billions Spent, Cash Burn Accelerates
11 Mar
Summary
- Oracle's free cash flow turned negative $24.7 billion due to a $50 billion capital expenditure forecast.
- The company raised $30 billion through bonds and preferred stock amidst over $100 billion debt.
- Cloud infrastructure revenue grew 84% year-over-year, reaching $4.9 billion.
Oracle is experiencing a substantial increase in cash burn, with free cash flow turning negative $24.7 billion over the trailing 12 months. This is largely due to a projected $50 billion in capital expenditures for fiscal year 2026, a significant jump from previous years, aimed at building AI data centers. The company has also amassed over $100 billion in debt, though it recently raised $30 billion through bonds and preferred stock offerings.
Despite these financial pressures, Oracle's performance remains strong. The company reported a 21% increase in fiscal third quarter earnings per share, surpassing Wall Street expectations. Its cloud infrastructure revenue, crucial for its AI ambitions, grew by 84% year-over-year to $4.9 billion, aligning with its goal to compete with major cloud providers. Total cloud revenue increased by 44% year-over-year.
Oracle executives emphasize that their enterprise software is resilient against AI-driven disruption, with co-founder Larry Ellison highlighting the company's use of AI tools for automation platforms. The company also benefits from a substantial remaining performance obligations (RPO) backlog of $553 billion, indicating strong future demand. Strategies like customer-funded capacity buildouts aim to mitigate negative cash flow during this hyper-growth phase.
