Oracle Stock Is Down 60% From Its High. Here's Why I'm Still Not Buying.
2026-09-30 18:12
•Johnny Rice •The Motley Fool
•••••• ••••••••• Axe Cap view
Why Oracle’s AI Boom Isn’t Enough to Buy Yet
Oracle’s rapid cloud growth masks serious financial risks that warrant caution.
Oracle’s cloud division is undeniably expanding fast, with over 120% revenue growth and a massive $664 billion backlog. Yet beneath the surface, the company’s financials look fragile. Its enormous $95 billion annual capital expenditure dwarfs negative free cash flow of $-5.4 billion, forcing reliance on $125 billion in debt and $288 billion in lease commitments. This is not a typical tech giant flush with cash. If the AI frenzy slows, Oracle’s high leverage and cash burn could turn into a real problem. South African investors would be wise to note that this contrasts with more conservative balance sheets of local tech-linked counters like Naspers and Prosus. With the rand still volatile against the dollar, introducing unnecessary risk from a heavily indebted US cloud play feels uncomfortably exposed. The few silver linings won’t outweigh the structural burden, at least for now. this is just our opinion and not financial advice
Avoid Oracle for now; better to watch for signs of sustainable free cash flow. Instead, keep exposure to local tech proxies like Naspers and Prosus, which have healthier balance sheets and rand-hedged upside.
- ORCL
- Naspers
- Prosus
- USD/ZAR
- AI growth stays strong, alleviating cash flow pressure
- US dollar strength increases rand hedge appeal
7/10
Oracle's cloud infrastructure business is booming with 121% revenue growth and a $664 billion backlog, but the company faces significant financial risks. Its $95 billion annual capex spending far exceeds its negative free cash flow of -$5.4 billion, forcing the company to rely heavily on debt ($125 billion) and lease commitments ($288 billion). Unlike other tech megacaps, Oracle's precarious financial position makes it vulnerable if the AI boom slows.
Our take is based on reporting first published by The Motley Fool.