top of page
Search

Oracle's Weak Outlook

December 11, 2025


Three months ago, Oracle dropped a huge surprise on the AI world.  It had won a massive AI cloud computing contract.  It was literally the largest single deal in the history of enterprise software.  Oracle was now apparently the legit 4th largest cloud computing platform.   Oracle’s stock spiked 35% (!) in a single day on the news.  The entire AI band of brothers all saw their stocks rally on the news as well.  “There’s an infinite flow of money, and it’s enough to fill up everyone’s cups!  Even Oracle’s!” — or so they thought.


But the party is over.  


And the euphoria has worn off.  It was later revealed that the contract was solely from OpenAI (owner of ChatGPT).   It was further revealed that maybe the terms of the deals aren’t quite exactly ironclad.  (You know, if OpenAI doesn’t have the money to actually pay Oracle, for instance.)  It was further-further revealed that Oracle might have trouble getting enough money to buy enough equipment that it would need to actually fulfill the terms of the contract.  And so, over the following three months, Oracle’s stock gave back all of the 35% and then some.


And last night, Oracle confirmed that the outlook isnt as rosy as they initially thought.  They reiterated full year guidance for cloud revenue (that’s good).  But they lowered cloud revenue guidance for next quarter (that’s bad), and they raised the capex spend guidance by 40% (that’s also bad).


It’s by no means over for Oracle.  But the path forward is much less certain now.  Most worrisome, Oracle is now running cash flow negative – by a lot.  Operating cash inflow (ie, EBITDA) less the capital being invested (ie, capex) is now negative $9bn over the past four quarters.  They’re funding this with an ever growing pile of debt.  That introduces a substantial risk that you don’t normally see with software companies.  Most of them run with “excess cash”.  Companies with a lot of debt usually get penalized with lower earnings valuations – because they’re inherently riskier now.  


For the rest of the sector, it’s having negative ramifications through the AI stack.  The fear is that Oracle might not be able to actually buy all the equipment that it promised to buy.  So today, the big AI equipment sellers are all down – Nvidia, Broadcom, AMD, Hewlett Packard, Dell, etc.  


The “AI trade” is definitely not over.  But that euphoric feeling from 3 months ago has morphed into a hangover.  



Other News


Warner Bros - What’s the latest?


No new “news” on the Warner Brothers deal.  Paramount announced its $30/share offer on Monday.  And that expires on Jan 8th.  The next big milestone will be if Netflix responds by increasing their offer a few bucks.  I mean, they’ve come this far — what’s a few more billion??


Given the consumer ramifications (Netflix prices, movie prices, etc) and political ramifications (who controls CNN?), there’s a lot of talk on both sides of the political aisle.  President Trump has been playing coy to some extent.  “I dont know much about it,” etc.  My spider sense thinks that he might ask for a guarantee from Paramount for more favorable treatment from CBS News and CNN before he eventually blesses the deal.  A deal-maker never gives away anything for free!


If Netflix does not increase their bid, then the question is: what are the cable channels worth in the open market?  That’s the difference between the two bids.  Paramount includes them in its $30 offer.  But Netflix will let them trade as a public company, where they could be worth who-knows-what.


Upcoming Earnings


It might feel like the year is over.  But we still have a few more key earnings announcements left.  Tonight alone, we’ll get Costco, Lululemon, and Broadcom.  Those will have read-thru impacts into consumer spending and AI spending.  And next week, we’ll get a mish-mash of names including FedEx, Nike, Lennar Homes, and others.  


Disney and AI


Disney announced a deal this morning with OpenAI (owner of ChatGPT and other AI plaforms).   Basically, Disney invests $1 billion in OpenAI.  In exchange, for the next three years, OpenAI’s video generator, Sora, can use Disney characters.   These characters include the traditional Disney names, but also characters from the Marvel and Star Wars universe.  Disney will have the rights to post some of the content on its own Disney+ platform.  


Sora was released with much fanfare.  But it has failed to make a massive dent in the current zeitgeist.  Perhaps this will change the game?

Recent Posts

See All

Comments

Gramercy
  Private

Important Disclosure:

This communication is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or investment product. The views and opinions expressed herein are those of the author as of the date of publication and are subject to change without notice. Information has been obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed.

This material should not be construed as investment advice, tax advice, legal advice, or a recommendation regarding any specific product or strategy. Past performance is not indicative of future results. Any forward-looking statements or projections are based on assumptions that may not come to pass and are subject to change.

This communication is intended solely for clients of Gramercy Private Wealth, LLC (aka, "Gramercy Private") and is not intended for redistribution or use by any other persons. Investing involves risk, including the potential loss of principal. Please consult your financial advisor before making any investment decisions.

Gramercy Private Wealth, LLC (aka, "Gramercy Private") is a registered investment adviser. Registration does not imply a certain level of skill or training.

bottom of page