Oracle rises as AI-fueled backlog growth deflects spending worries
ORCL•Analysts remain focused on cash flow and financing risks
"Despite Oracle asking customers to partially fund the technical hardware to alleviate its cash flow pressure, we do not foresee Oracle's cash flow profile changing anytime soon," Morningstar analyst Luke Yang said.
"It will take years before (cloud) revenue reaches a scale that supports continuous capacity expansion while generating positive cash flow at the same time."
Oracle carries risks around financing and data center profitability at a time when component costs have surged and broader backlash to data center development has grown in the U.S.
The company has said it will raise $40 billion through debt and equity financing in its current fiscal year, including the $20 billion stock sale it completed in the first quarter.
It reported negative free cash flow of $5.40 billion, better than analysts' estimate of a cash burn of $9.56 billion, according to data compiled by LSEG.
"(The) results were a solid step forward in balancing the investor discussion around a company delivering accelerating revenue growth, at scale. While the company's debt load is a valid concern, the positives in the business have gotten lost in the mix," Evercore analysts said.
