"The balance sheet makes this harder to ignore. Oracle is carrying $104 billion in debt, a debt-to-equity ratio above 5x, and free cash flow that turned negative last year after averaging $12 billion annually for nearly a decade. Across 80 large-cap tech peers, Oracle sits in the bottom 5th percentile on leverage. No other major software company has stretched its balance sheet this far while simultaneously betting on a growth inflection."
- This is where it's gone the wrong way. On 8 July, S&P cut Oracle to BBB- and the numbers behind it aren't pretty. Total debt sits around $167 billion and is still climbing. Oracle is raising capital hard to fund the buildout: a $5 billion convertible preferred in February, a $20 billion equity issuance planned this year, and tens of billions more flagged over the next three years.
"A standard DCF spits out $300 intrinsic value, implying massive upside."
"Analysts project revenue nearly doubling from $57 billion today to $130 billion by FY2028."
- The valuation math is broadly unchanged. It still runs on analyst revenue estimates, now around 30% a year, with revenue tripling to roughly $218 billion by FY2030. The difference is that the first year of that ramp actually happened, so those estimates carry more credibility than they did when I first wrote about it.
So where does that leave us? The demand is real and the backlog is enormous, but the whole thesis now rests on execution. Our DCF still says the reward is there at roughly $300 against $141 today. But that number assumes clean execution, and the S&P cut is the market reminding you that clean execution is exactly what's in doubt. Cheap for a reason, or cheap despite a fixable problem. That's the call you're actually making here.
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