Oracle Joins Code Red Club

James FoordInvesting Group LeaderFollow5ShareSavePlay(9min)Comments(2)SummaryOracle plunged over 10% post-Q2 despite strong cloud growth and surging RPO, as investors question AI capex and cash flow sustainability.Cloud Infrastructure revenue soared 68%, and RPO exploded 438% to $523B, but heavy capex drove free cash flow negative and raised debt concerns.Management asserts that capex is tied to contracted demand, with flexible funding models and near-term RPO conversion expected to support balance sheet health.I view the sell-off as a buyable dip for ORCL, provided investors believe in rapid RPO conversion, manageable leverage, and free cash flow inflection. J Studios/DigitalVision via Getty Images Thesis Summary Oracle Corporation (ORCL) just plummeted over 10% after Q2. A great quarter by many measures, but investors are becoming sceptical of the AI narrative. Cloud revenue was up 34%, with Cloud Infrastructure up 68% and RPO exploding 438% year over yearThis article was written byJames Foord26.22K FollowersFollowJames Foord is an economist by trade and has been analyzing global markets for the past decade. He leads the investing group The Pragmatic Investor where the focus is on building robust and truly diversified portfolios that will continually preserve and increase wealth.

The Pragmatic Investor covers global macro, international equities, commodities, tech and cryptocurrencies and is designed to guide investors of all levels in their journey. Features include a The Pragmatic Investor Portfolio, weekly market update newsletter, actionable trades, technical analysis, and a chat room. Learn more.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in ORCL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Recommended For You