Oracle(US:ORCL) Huan Qiu Wang·2025-10-20 05:11Core Viewpoint - Oracle raised its long-term performance guidance significantly at the AI World Conference in Las Vegas, projecting revenues of $225 billion and adjusted earnings per share of $21 by fiscal year 2030, but the market reacted negatively, with the stock price dropping nearly 7% the following day, marking its worst single-day performance since January [1] Group 1: Financial Projections - Oracle's AI infrastructure business is expected to achieve a gross margin of 30% to 40% by 2030, addressing previous concerns about the profitability of its GPU leasing business, which had a gross margin of around 16% [3] - The company increased its fiscal year 2030 cloud infrastructure (OCI) revenue forecast from $144 billion to $166 billion, indicating a compound annual growth rate (CAGR) of 75% for its OCI business [3] - Oracle's backlog reached $455 billion at the end of the first fiscal quarter, with an additional $65 billion in new OCI contracts signed in the past 30 days, bringing its remaining performance obligations (RPO) to over $500 billion [3] Group 2: Market Concerns - Analysts from Deutsche Bank and Jefferies raised concerns about the substantial capital required to achieve such aggressive growth targets, noting that Oracle did not disclose its capital expenditure forecasts, leading to doubts about meeting AI demand costs [3] - Consensus forecasts from Visible Alpha suggest that Oracle will experience negative free cash flow over the next three fiscal years, with cumulative cash consumption nearing $29 billion by the end of fiscal year 2028 [3] - Morgan Stanley's debt analysts pointed out that Oracle's recent issuance of $18 billion in bonds would only cover about a quarter of its cash needs until 2028 [3] Group 3: Historical Performance - Oracle's long-term goal requires a compound annual growth rate of slightly over 30% in revenue over the next five years, a target the company has not achieved since the 1990s [4] - Analysts from JPMorgan highlighted that software companies historically struggle to meet 4-5 year guidance frameworks, raising further skepticism about Oracle's ambitious AI narrative [4] - Despite Oracle's long history and experience through various industry cycles, uncertainties regarding capacity ramp-up, profitability realization, and significant capital expenditures pose challenges to the company's ambitious growth plans [4]