Oracle rises as AI-fueled backlog growth deflects spending worries
FILE PHOTO: Oracle logo is seen in this illustration created on September 9, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
Read a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
Sept 11 : Oracle’s shares gained 3 per cent in early trading on Friday after a $26 billion jump in revenue backlog eased some concerns around its massive debt-driven spending spree, but analysts said the company’s cash flow recovery is still a long way off.
Roughly half of the $664 billion in its backlog is expected to convert into sales within the next 36 months and much of its newly contracted revenue will not require its own capital, Oracle said, as it relies on client prepayments and customers’ own chip supply to build out capacity.
That, coupled with upbeat first-quarter earnings and an improving balance sheet, helped Oracle shares recover from a spell of underperformance.
The stock has fallen more than 21 per cent this year through the last close, compared with a nearly 11 per cent rise in the S&P 500 index, as investors questioned Oracle’s costly AI bets and the viability of its traditional software business in the AI era.
Guess Word
Crack the word, one row at a time
Buzzword
Create words using the given letters
Mini Sudoku
Tiny puzzle, mighty brain teaser
Mini Crossword
Small grid, big challenge
Word Search
Spot as many words as you can
“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.
The stock trades at 16.86 times its forward earnings estimates, compared with Microsoft’s 23.84 multiple and Amazon’s 22.58, according to data compiled by LSEG.
Source: Reuters
Sign up for our newsletters
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
