Company raises its capital expenditure forecast as it doubles down on AI infrastructure bet.
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Oracle shares slide on $15B increase in data center spending
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It is a lot, one of the highest from a tech company. It is #70 currently in terms of total debt holdings. You can view sites like https://companiesmarketcap.com/companies-with-the-highest-debt/ to see how much debt major corporations hold. The top 100 are overwhelmingly banks or asset holding companies, with car companies and telecoms mixed in here and there (top 20 for example are all banks, except Toyota at #20).
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AI is already infiltrating all the other healthcare products hospital systems use; that well is being poisoned from the outside. I see new AI slop companies being pushed every week in the healthcare world.
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Rather than borrowing a huge amount of money to build all the data centres they need themselves, Oracle are signing contracts with third-parties who will assume the risks, costs, and debt to build said data centres, with an agreement that Oracle will immediately lease them once they are ready.
Presumably, if the AI bubble bursts before the data centres are ready and Oracle balks at the lease agreement, there will be plenty of law suits to go around.
Edit: I wonder how many of those 3rd-party data centres are being funded in part through State and municipal grants, loans, and tax incentives?
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It means they're renting space in data centers rather than building their own. Renting is a cash expenditure, whereas building/owning is a capital expenditure. Capital projects tend to require a lot of financing, and in Oracle's case especially that means lots of debt financing.
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Edubfromktown
Ars Praetorian
Oracle Cloud Infrastructure (OCI) is total caca compared to AWS and Azure. (I have not used Google GCP and suspect it too runs circles around OCI).
Anyone who is banking on them being successful at anything other than overcharging the heck out of their customer base needs to get their head examined!
Anyone who is banking on them being successful at anything other than overcharging the heck out of their customer base needs to get their head examined!
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When a company like Oracle sneezes, the whole tech sector catches a cold. Nasdaq down 1% today.
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They were never illegal, they were restricted and under more oversight between 1934 and 1982.
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Real bad timing for this with David Ellison’s attempt at getting WBD to take his Paramount deal instead of the Netflix deal.
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for something like Oracle I really doubt that'll be the case. "too big to fail" for the huge US automakers and banks during the 2008 existential crisis was a real risk. If they did fall over then by all counts we would STILL be in a nasty recession not unlike what happened to Japan in the 90s. Which they still haven't recovered from. It would have been MILLIONS of people out of work for a VERY long time, and stuff like banks are crucial infrastructure for countries.
MS and Amazon are diversified enough where AI stuff not panning out won't really hit em too hard. might be a kick in the shin, not ripping its heart out. Oracle going whole hog on this AI garbage is a little too centralized of a business, but if they fall over then it won't really be that nasty.
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Think of it as the reverse - if everyone in here really did have the ability to predict things like that then they'd be making a LOT more money than they do now. And they wouldn't be wasting time on internet commenting.
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Certainly Larry and David Ellison trying to hoover up as much of the remaining major news media as they can, including both CBS News and CNN certainly won't be part of any push in the press to bail Oracle out as Too Big To Fail when the bubble pops. Perish the thought...
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One would think that, for a company called Oracle, they would see that coming...
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Perhaps a lot of unhappy Oracle clients have found an off-ramp.
Ellison is one of those guys who does not make friends.
Ellison is one of those guys who does not make friends.
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You're in the Ars comment section calling market conditions. Ergo, you're terrible at calling market conditions, too.
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Given that they actually make money on that part of the business, it would likely be sold off as a going concern to pay off some debt.
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The “market” can and these days often is well detached from reality for individual stocks (and sadly for broader sectors of it).
A number of folks here are often looking at things much closer to the reality of the businesses involved. Yes the market can remain irrational but it doesn’t make folks wrong about the fundamentals. If you are left not holding an empty bag be happy but just know that someone else (many others) likely have the empty bag.
Tesla for example is highly detached from the companies fundamentals and wound around future handwaving and Musk’s cult of personality (among other manipulations)… despite many examples of missed (and repeatedly missed) product promises over a decade now in some cases. It will fall down at some point unless a lot of things finally become realized… the odds are not in its favor given competition, commoditization of some of the industries it is trying to play in, and being so dependent on Musk’s cult (he will “end” in some way at some point).
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Oracle is much like a parasite, once it's in you business, it's really hard to extricate.
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Pay off the debt? It would be more likely the profitable pieces will be sold and the liabilities stuck in a shell they slide into bankruptcy. In the casino business, that's called "playing the Trump card."
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If Oracle falls over all of their cloud ERP customers are going to be knee-deep in trouble.
Even though I really dislike Oracle I'm glad were still on-prem with our ERP, even though IT seems to toy with the idea of moving it to the cloud.
In general I just wish this bubble pops soon so we can get over this absolute madness.
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He took his money and is pulling the cream off the top still. He may get the boot but he'll be sitting on billions.
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What does that last sentence even mean? But you are totally right. The scheme was not ringfenced. But then again you had to be at least 70 to claim it and if I am not mistaken (with my track record I probably am!). it was set at 5 bob a week (about 26 quid, not much but stuff cost a hell of a lot less then)
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Precisely. A lot of the internet travels through Amazon, Microsoft, and Goggle.
That's a nice internet you have there....would be a shame if something were to happen to it.
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It'll be more than just Oracle employees, the bubble bursting will cause some big issues - How to make $35 trillion disappear
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Worth noting that hasn't been updated for the latest quarter for Oracle yet - they're at $115b in debt (because that chart includes lease debt as well).
Just to add to this, the car companies are on there because of their financial services. They're acting as financial institutions, they borrow money from banks and lend it to customers to buy cars. So at least it's tied up in an asset with a repayment system.
Phone companies take on debt to fund their massive networks. Despite that they get tonnes of government dollars and do a shit job overall, they do invest quite a lot in their networks to keep them running. Debt is pretty much a requirement here. Networks aren't a bubble, unless we decide to turn off the internet.
Amazon's debt is growing because of their accelerated investments, but there's piles of existing lease debt relating to their warehouse space. They have tens of billions tied up in leasing those properties and, again, Amazon's delivery setup isn't a bubble (as far as I know). AWS debt is becoming a larger and larger portion (not disclosed in the quarterly statements, but in their last annual statements that's where the debt is growing the fastest). They could knock off their non-lease debt with a few quarters profits.
Oracle, on the other hand, needs 5 years of profits just to knock off their debt. That's insane. Their balance sheet looks awful, the $60b of goodwill (i.e. "we overpaid for our acquisitions and this will eventually be written down") is the only thing making it look marginally ok, but there's no offsetting receivable for this debt. It needs to be turned into more and more profit somehow. Even if Oracle's AI play somehow out great, there's not really any way for shareholders to get their money back out of the company while they pay down all this existing and planned debt.
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They already are trying to do this and are calling it an "AI first" EHR. They already fired everyone in Kansas City that knows how EMRs work so I suppose this is their way of catching up a decade of mismanagement.
I still have old coworkers that are affiliated with Cerner and they've all told me that Oracle has basically given up getting any other client save for VA, DoD, and NIH. This, of course perfectly aligns with Larry's version of libertarianism.
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macosandlinux
Ars Praefectus
Well, at least your handle checks out. You've waited two years for this
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While I grant your points make logical sense, I may take this moment to remind you of exactly what type of foreign, corrupt entity calling itself the current administration is.
They'll be too big to fail and receive all the tax-payer bail out they need simply because Trump met with someone the day before. (Probably also involving some under the table kickback deal or crypto scheme)
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They can only afford it because it's not their own money they're spending.
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Not to worry, their new OpenAI project is starting from scratch and being run entirely in-house rather than relying on contractors...
... yeah.
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As a closeup veteran of the Dot Com Bust, I do not feel the AI Bubble is bursting, Oracle just had a bad quarter. I know everyone here, myself included, wants see it pop, but it hasn't happened yet.
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Won't matter to what really matters which is the employees. Like sure none of them will go out of business, but they will slash a ton of jobs.
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