One quarter may make all the difference for recent investors. On Wednesday, Dec. 10, Oracle (ORCL) reported quarterly results. Investors did not respond well to RPOs – remaining performance obligations. These bookings are not guaranteed future revenue.
In the second quarter, Oracle posted revenue of $16.06 billion (+13.9% Y/Y). RPO increased by 438% to $523 billion. This figure is massive, compared to the cloud revenue of $8 billion, $4.1 billion in cloud infrastructure revenue, and $3.9 billion in cloud application revenue.
ORCL stock might open down by around 11% this morning. GAAP EPS beat expectations only because of a one-time gain from selling Ampere. Larry Ellison said that Oracle sold the firm, saying the firm is no longer a strategic fit in its efforts to design, manufacture, and use its own chips for its cloud datacenters.
Oracle now commits to a policy of chip neutrality. That means that although it will buy Nvidia’s (NVDA) latest GPUs, it is prepared to buy whatever chips its customers want.
Risks
Readers will not easily find Oracle’s debt outstanding in the earnings press release or financial statements. Furthermore, the negative free cash flow of $13.4 billion increases risks for investors. The company expects to increase its spending, which will worsen FCF.
Watch out for ORCL stock testing new lows in the coming months.
