Oracle (ORCL): The Cloud's Dark Horse

1. Executive Summary

The "Negative Cash Flow" narrative is largely a function of massive CapEx investment to build out OCI (Oracle Cloud Infrastructure). Oracle has successfully positioned OCI as the "AI Training Cloud" of choice for Microsoft and other hyperscalers due to its superior networking architecture (RDMA).

Key Thesis Points

1. AI Training Demand: Oracle has secured billions in backlog from AI startups (Cohere, xAI) and Microsoft Bing because OCI is faster and cheaper for training large models than Azure/AWS.
2. Cerner Indigestion: The acquisition of Cerner has been messy, dragging down margins and cash flow. The thesis relies on Larry Ellison fixing Cerner's legacy code base.
3. Database Stickiness: You cannot simply "turn off" an Oracle Database. It powers the world's bank accounts and airlines. This annuity stream funds the AI expansion.

2. Business Overview

• OCI (Gen2 Cloud): The growth engine.
• Enterprise Software: ERP (NetSuite, Fusion), HCM.
• Hardware: Legacy Sun Microsystems servers (declining).

3. Financial Analysis

(See Financials Tab – Note Free Cash Flow volatility)

• CapEx: Oracle is spending ~$10B+ annually on GPUs and Data Centers. This compresses FCF in the short term.
• Debt: Leverage increased significantly to buy Cerner ($28B). Deleveraging is a priority.

4. Risks

• "Fake Cloud": Competitors argue OCI's growth is inflated by self-dealing or low-quality startup credits.
• Cerner Write-down: If the healthcare integration fails, a massive impairment charge is likely.