Oracle (NYSE: ORCL) is a cloud-service and database provider. It dropped 15% today because of a Chinese-AI LLM that was apparently developed with much less cash than what OpenAI’s ChatGPT-4 was trained on. The shift from on-premise (data servers, databases) to cloud shows that Oracle could expand its already dominant market share from databases to cloud-powered infrastructure and applications.
Latest quarter results: “Q2 Total Remaining Performance Obligations $97 billion, up 49% in USD & 50% in constant currency”
“Remaining performance obligations represent contracted revenues that had not yet been recognized”
From 2024 10-K: “As of May 31, 2024, our remaining performance obligations were $97.9 billion, of which we expect to recognize approximately 39% as revenues over the next twelve months, 36% over the subsequent month 13 to month 36, 19% over the subsequent month 37 to month 60 and the remainder thereafter.”
————-RPO ———/revenue——
2025 Q2: $97 billion – $14.1 billion
2025 Q1: $99 billion – $13.3 billion
2024 Q4: $98 billion – $14.3 billion
2024 Q3: $80 billion – $13.3 billion
2024 Q2: $65 billion – $12.9 billion
2024 Q1: N/A – $12.5 billion
Revenue and RPO are both cyclical and upcoming results may vary depending on the quarter.
“The volumes and amounts of customer contracts that we book and total revenues that we recognize are impacted by a variety of seasonal factors. In each fiscal year, the amounts and volumes of contracting activity and our total revenues are typically highest in our fourth fiscal quarter and lowest in our first fiscal quarter.”
“The amount of revenues recognized during the year ended May 31, 2024 and 2023 that were included in the opening deferred revenues balance as of May 31, 2023 and 2022, respectively, was approximately $9.0 billion and $8.3 billion”
Market cap: $442b
TTM sales: $53.84b
TTM net income: $10.98b
MRQ Total cash: $10.91b
MRQ Total debt: $84.51b
TTM Levered free cash flow: $10.34b
Dividend yield: 0.83% with 41% payout ratio
Forward P/E: Hovering around 25x
Management has forecast annual EPS growth of 10% into 2026 and 20% into 2029. If they can manage to extract value from its deferred contract revenue and continue to scale its artificial intelligence, cloud and services business and mesh it together into an Oracle ecosystem, they look poised to deliver significant returns.
*I own and recommend shares of ORCL*
Devlin Demontigny 