Oracle’s (NYSE: ORCL) market is disconnected from reality, but starting to catch on. The stock was punished like an emergent tech start-up with no revenue or hope for profits because of its debt, but this isn’t a cash-burning research story. Oracle is a legacy tech company, capable of growth and profits, that successfully shifted to the cloud and is now a hyper-scaler serving the hyperscale datacenter industry, ubiquitous across clouds and regions.
Yes, debt is swelling, but it funds much-needed capital expenditure (CapEx) tied to contracted revenue. This contracted revenue is from existing clients who represent the bulk, if not the entirety, of the hyperscale universe. In this scenario, Oracle only needs to build the data center to recognize the revenue; a tidal wave of revenue is coming down the pipe, more than enough to cover the debt. News since its March 10 earnings report includes expanded deals with Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN), increasing their use and Oracle’s market exposure, and increased capacity with Bloom Energy (NYSE: BE).
