Oracle Stock Just Surged After CoreWeave Earnings. Here's Why One Analyst Says It's Built for the Data-Center Backlash
The Motley Fool ·
Key points
- Oracle’s shares rose roughly 9% to around $128 following a broader AI stock rally sparked by CoreWeave (CRWV) surpassing forecasts and showing a large customer prepayment backlog that underpins demand for AI compute.
- CoreWeave reported about $132.5 billion in backlog and roughly $9 billion in customer prepayments expected in the next three months, signaling real, upfront demand for AI capacity and alleviating some financing concerns.
- Analysts at Mizuho argued Oracle is better prepared than peers, noting that all five Oracle mega sites are under construction with four already permitted, implying potential resilience to permitting delays and possible upside if supply tightens.
- Oracle’s latest quarterly results showed cloud infrastructure revenue more than doubled to $7.4 billion and total revenue up 30% to $19.3 billion, with remaining performance obligations at $664 billion due to large, upcoming cloud contracts.
- The company faced heavy capital expenditure (about $28.5 billion in the quarter), negative free cash flow of $5.4 billion, and about $19.9 billion raised via new share issuance, raising questions about funding the buildout and associated dilution.
- Debt remained elevated, with roughly $125 billion in senior notes and long-term borrowings, while prepayments boosted operating cash flow to $23.1 billion, helping short-term liquidity despite long-term commitments.
- Investors are weighing the risk that persistent data-center demand will require years of investment, but the early pace of orders and prepayments provides a confidence signal that demand could endure, narrowing the perceived financing gap.
Summary
Oracle’s stock jumped about 9% as AI peers rallied after CoreWeave raised its revenue forecast and disclosed a massive $132.5 billion backlog, easing concerns about AI-capacity demand and funding. Analysts argue Oracle is better positioned amid political pushback on data centers, noting its construction progress and permits at mega sites. The rally comes despite Oracle’s heavy capital spending, rising debt, and a large share dilution from new equity, with investors eyeing next earnings for clarity on spending and backlog realization. The core thesis is that sustained AI demand could justify a high-capital, data-center-heavy model, even as near-term returns remain volatile.
This summary was written with AI. The full story has every detail.