Oracle: Higher Capex Is The Bridge Between RPO And Future Revenue
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Johnny Zhang, CFA2.42K FollowersFollow5ShareSavePlay(10min)CommentsSummaryOracle has sold off more than 40% from recent highs, driven by concerns over higher capex, credit risk, and the timing of revenue realization from RPO.Despite robust RPO growth of 437.8% YoY in FY2026, up from 359.4% YoY, investors remain skeptical due to capacity constraints.Capex is growing at triple-digit rates, pushing the capex-to-revenue ratio toward 80% in H2 and pressuring near-term FCF, but this investment is needed to support RPO growth.The net debt to adjusted EBITDA could remain below 4x, even if net debt triples over the next three years, and the selloff has largely priced in credit concerns.Trading at 26x non-GAAP forward P/E, about 40% below the 42x at my last rating. Mesut Dogan/iStock Editorial via Getty Images Fear of Credit and FCF Concerns Since Oracle Corporation (ORCL) announced Q1 FY2026 earnings three months ago, the stock is down 42% and is currently 17% below its pre-earnings level. The stock fell another 10% following Q2 FY2026 earnings last week. Some people blamed itThis article was written byJohnny Zhang, CFA2.42K FollowersFollowI'm specialized in fundamental equity research, global macro strategy, and top-down portfolio construction. I'm a senior analyst at a multi-strategy hedge fund with 7 years of experience. I graduated from UCLA with a degree of Business Economics and UMich Ross School of Business with a Master of Accounting. My articles primarily focus on company fundamentals.Analyst’s Disclosure:I/we have a beneficial long position in the shares of ORCL either through stock ownership, options, or other derivatives. 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.