Oracle is up 5% in postmarket trading after its quarterly results and outlook gave investors reason to cheer.
The hyperscaler reported:
Sales: $17.2 billion (estimate: $16.9 billion)
Adjusted earnings per share: $1.79 (estimate: $1.70)
RPOs (remaining performance obligations, or backlog): $553 billion billion(estimate: $537.8 billion)
Management also raised its sales outlook for the next fiscal year to $90 billion; analysts expected $86.7 billion.
The cloud company’s elevated indebtedness and expected cash burn compare unfavorably to other hyperscalers, which caused markets to treat its aggressive capex plans as more risky than those of its peers. That’s been exacerbated by OpenAI, itself a cash incinerator, being the source of much of Oracle’s pipeline of future business.
Oracle’s five-year credit default swap spreads widened significantly from mid-September through late January due to this counterparty and credit risk. The company’s perceived creditworthiness recovered after announcing plans to raise money through equity, not just debt, to find its expansion plans, before CDS spreads once again blew out to their widest level since 2009.
“Oracle has been stained by the negative sentiment around OpenAI and is generally viewed as a poster child for AI Capex excess / madness and so a super squeezy rally in the stock could tell us AI Capex fears have peaked for now,” wrote Brent Donnelly, president of Spectra Markets, ahead of this release.
This is a developing story.