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Oracle (ORCL -14%) is under heavy pressure following its Q2 (Nov) report, despite posting big EPS upside and its strongest revenue growth in 10 quarters. Revenue rose 14.2% yr/yr to $16.06 bln, but still fell short of analyst expectations, weighing on sentiment. The bigger concern: free cash flow (FCF) of $(10) bln, below street estimates and raising alarm about Oracle's ability to manage its sizable debt load.

• Cloud Momentum Remains a Bright Spot: Cloud infrastructure (OCI): +66% yr/yr in constant currency (accelerating from +54% yr/yr in Q1) as demand for AI training and inferencing remains robust. Total cloud revenue: $8 bln, up 33% yr/yr, despite lapping a tough +24% comp. Cloud now represents ~50% of overall revenue, marking a major shift in Oracle's business mix.
• RPO Growth Shows Deepening Backlog: A critical Oracle metric, Remaining Performance Obligations (RPO), ended Q2 at $523.3 bln, up 433% yr/yr and 15% sequentially. Growth was not as explosive as Q1, but sequential expansion is still encouraging. RPO benefiting from large contracts with Meta, NVIDIA, and others, improving customer diversification.
• CapEx, Debt, and Cash Flow Concerns: CapEx: $12 bln in Q2 (vs $8.5 bln in Q1), driven by AI data center buildouts. Oracle also raised its FY26 CapEx forecast by $15 bln, likely further pressuring near-term FCF. Management says the vast majority of CapEx is revenue-generating equipment rather than land/buildings. But with Oracle having completed an $18 bln jumbo bond sale in Sept 2025, one of the largest tech debt issuances ever, investors are nervous about leverage even as Oracle seeks to preserve its investment-grade rating.

Briefing.com Analyst Insight:

Oracle's Q2 results highlight a sharp contrast: surging cloud momentum and an enormous RPO backlog, but troubling near-term cash flow dynamics. The accelerating OCI growth (+66% CC) underscores Oracle's increasing relevance in AI infrastructure, particularly as hyperscalers and mega-cap customers diversify workloads. However, the $(10) bln FCF print and escalating CapEx commitments pose real concerns. Oracle's aggressive data center buildout is strategically sound, but the scale and timing create pressure on liquidity—especially following its $18 bln debt issuance. Given the leverage, CapEx trajectory, and below-consensus revenue this quarter, we see the stock as risky in the near term. Cloud strength is undeniable, but investors may demand clearer evidence that these massive commitments will translate into sustained, profitable growth.