As it welcomes 30,000 customers and partners to Las Vegas for AI World, Oracle must overcome relentless questions about its rising $100-billion-plus debt load and negative cash flows by continuing to out-innovate its competitors and maintain its triple-digit growth in AI and cloud infrastructure.
Depending on your point of view, Oracle’s booming AI and cloud business represents either the spring of hope or the winter of despair:
- for its fiscal Q1 ended Aug. 31, Oracle Cloud Infrastructure soared 121% to $7.4 billion;
- for the same period, Oracle’s RPO (backlog) jumped 46% to a whopping $664 billion; but
- free cash flow was -$5 billion and reflects Oracle’s ongoing need to take on huge levels of debt to finance the AI data center buildout required to fulfil that RPO of $664 billion, which is second only to Microsoft’s RPO of $678 billion; and
- ongoing concerns about Oracle’s debt load and its top-heavy RPO commitment to a single company, $300 billion from OpenAI, have hammered the company’s market cap from a high of more than $900 billion a year ago to its current level of about $382 billion.
AI World Innovation Agenda
At its big event in Las Vegas this week, Oracle is looking to address the innovation portion of its agenda by rolling out significant product advances across its extensive portfolio including OCI, AI Database, Fusion Agentic Applications, industry-specific applications, and more.
In turn, those innovations need to continue fueling the company’s torrid growth in AI and cloud infrastructure, and to accelerate growth in its apps and agents business. That growth is needed to get Oracle’s cash flow back into the black and alleviate the company’s need to continue borrowing to fund its highly ambitious AI data center expansion.
Final Thought
It will be interesting to see what role founder and chairman Larry Ellison plays at this week’s AI World because on the company’s fiscal-Q1 earnings call in September, Ellison did not participate, marking a first for him and his company since it went public 40 years ago.
Over the intervening four decades, Ellison’s keynotes at Oracle’s big annual events have become enormously important glimpses into the future for the company’s customers, partners, and investors. And while CEOs Clay Magouyrk and Mike Sicilia have each demonstrated considerable prowess in mapping the future of this crazy business, Ellison’s presence could be helpful to the company at this unsettled time.
