Oracle Briefly Joined the Trillion-Dollar Club. But Investors Should Watch These 3 Red Flags.

Group 1 - Oracle has crossed the trillion-dollar market cap mark before slightly pulling back, currently trading at $877 billion [1] - The company is repositioning itself as an AI and cloud infrastructure provider, supported by a $455 billion backlog and growth in Oracle Cloud Infrastructure [1] - Investors should be cautious about the underlying financial dynamics despite the AI narrative [2] Group 2 - Oracle is planning capital expenditures of around $35 billion in fiscal 2026, which is significantly higher than many companies' annual R&D budgets [4] - The company's operating cash flow for fiscal 2025 was $20.8 billion, which is below the expected capex for fiscal 2026, indicating potential strain on free cash flow [5] - The shortfall in cash flow may require Oracle to rely on balance sheet cash or external funding, potentially impacting shareholder returns [6] Group 3 - Oracle's aggressive spending on cloud and AI infrastructure has led to high leverage and thin liquidity, making it financially vulnerable [9] - The company carries a debt load exceeding $90 billion, with total liabilities of $156 billion, which is more than six times its equity of $25 billion [10] - The current ratio is below 1, indicating that short-term obligations exceed liquid assets [10]