Oracle Corporation (NYSE:ORCL) is quite important when it comes to the AI buildout. The shares are down by more than 20% year-to-date. Cramer mentioned Oracle Corporation (NYSE:ORCL) in a tweet made close to midday on the 17th. The shares closed 5% higher that day:
“Strength in Oracle is a very positive sign…”
What Cramer meant was that the movement in Oracle Corporation’s shares indicated broader sentiment about the AI buildout. The media and markets were caught by surprise over the weekend after Anthropic CEO Dario Amodei remarked that AI development needed to slow down due to safety concerns. In his morning appearance on the 15th, Cramer pointed out that even if some firms stopped buying AI infrastructure equipment providers such as Dell, others would continue to scoop it up.
For Oracle Corporation, the AI buildout is quite important since the firm has invested billions into setting up AI infrastructure. The firm’s free cash flow was negative $5.4 billion in its fiscal first quarter, while its capital expenditures were $28.5 billion. The negative free cash flow was a significant expansion as the year ago figure was negative $362 million. The negative FCF wasn’t the only metric that grew. During fiscal Q1, Oracle Corporation incurred $1.4 billion in interest expenses, which jumped over the year ago quarter’s $923 million. Additionally, in the latest quarter, the interest expenses accounted for 8% of the firm’s revenue, while the year-ago figure was 6%.
Consequently, these metrics mark a bearish overhang for Oracle Corporation even as the firm continues to stun with its backlog. Backlog grew to $664 billion in the first quarter, with $30 billion of orders being from new AI contracts. Additionally, Oracle Corporation’s revenue and profit grew by 60% and 30% in the quarter. Additionally, during the quarter, the firm’s Oracle Cloud Infrastructure (OCI) revenue grew by 121% annually to $7.4 billion while its cloud revenue jumped by 62% to $11.6 billion. With the firm guiding FY27 revenue growth at 34%, the spending appears to be allowing Oracle Corporation to maintain its revenue growth.
Looking at hedge fund sentiment, 119 funds tracked by Insider Monkey had held a stake in Oracle Corporation in Q2 for a slight increase over Q1’s 115. The shares trade at a forward P/E ratio of 18.55, while the price to sales ratio of 6.16 is higher than peer firm CoreWeave’s 5.48. Short interest as a percentage of float is 2.6%, which is substantially lower than CoreWeave’s 17.84%. The stock closed 1.9% lower on Friday, the day after Cramer’s tweet.
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