Oracle’s numbers dazzled Wall Street again. But scratch the surface and the shine looks a little costly.
The age of cheap computing power is over. The new frontier of cloud and AI infrastructure demands its empire’s ransom in juice, steel, silicon, and, above all, capital.
Case in point: Oracle is spending $21 billion this year on infrastructure. Last year, it was $7 billion. Some call that growth. Others would call it combustion.
Over ten years, revenues rose 55%. Operating cash flow, 52%. But capital spending has exploded tenfold. When investments outpace profits four to one, something’s gotta give.
And give it has. The lavish stock buybacks — Oracle’s old party trick — have slowed. Between 2010 and 2024, the company spent $140 billion buying back its own shares, slicing its share count nearly in half.
In the process, Larry Ellison tightened his grip on other shareholders’ money.
Add $38 billion in dividends, and investors pocketed a total of $180 billion — more than Oracle’s entire market value back in 2010. A fine vintage if you were an early shareholder.
But today’s investors? They’re buying into a different Oracle. The company has traded its cash cow for a construction site. Its future now depends on whether this massive build-out of AI and cloud capacity can mint profits faster than it burns cash.
The market seems to think so. The Austin-based company is trading at record-high earnings multiples. We’re a long way from 2012, when Oracle, like Microsoft, changed hands at just eight times free cash flow.
A full cycle of easy money and limited capital expenditures let Oracle borrow cheap, buy growth, and juice its stock. That game worked. But the rules have changed.