Oracle: A Trade-Off Between Growth And Quality

Johnny Zhang, CFA2.65K FollowersFollow5ShareSavePlay(11min)CommentsSummaryOracle's 3Q earnings results were solid, beating all estimates and showing continued acceleration in both the top and bottom lines.The company raised $25.8 billion in debt and $5 billion in convertible preferred stock in 3Q and will not issue additional bonds beyond the $50 billion threshold for CY2026.Capex YoY growth has maintained +200% over the past six consecutive quarters, and FCF is expected to drop by $25 billion in FY2026.Despite a higher debt structure, its interest coverage ratio (GAAP operating income) has remained around 4.5x, which is still healthy.Its forward non-GAAP P/E has declined by 50% from its peak, already reflecting a higher risk premium. Mesut Dogan/iStock Editorial via Getty Images Selloff Has Stabilized and Sentiment is Improving Oracle (ORCL) seems to have stopped bleeding and bottomed out from its February low. The stock has gone through a super boom-and-bust cycle over the lastThis article was written byJohnny Zhang, CFA2.65K FollowersFollowI'm specialized in fundamental equity research, global macro strategy, and top-down portfolio construction.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.