Remember when your friend convinced you that crypto was “definitely going to the moon” right before it crashed? Well, Oracle just became that friend for the entire AI industry – except this time, the stakes are a lot bigger than your college beer money.
Oracle dropped their Q2 earnings this week, and while the headlines looked pretty – revenue up 14% to $16.1 billion, cloud revenue surging 34% – the reality underneath is about as appealing as finding out your Uber driver is your ex.
The Good News (Spoiler: It’s Not That Good)
On paper, Oracle crushed it. Their cloud infrastructure grew 68%, they’ve got $523 billion in future contracts lined up, and earnings per share jumped 54%. Sounds amazing, right? Well, here’s where it gets spicy.
That earnings beat? It came from selling off a subsidiary to SoftBank for a cool $2.7 billion. Strip that one-time windfall away, and Oracle actually missed both revenue and earnings expectations. It’s like claiming you’re financially responsible because you sold your car to pay rent – technically true, but not exactly sustainable.
The Debt Monster Under the Bed
Here’s where things get genuinely concerning. Oracle is sitting on $108 billion in debt – that’s “small country’s GDP” money. They’re planning to spend $50 billion this year alone on AI infrastructure, which is $15 billion more than they originally planned. That’s like deciding mid-renovation that you definitely need a gold-plated bathroom.
The company has burned through $10 billion in free cash flow for three straight quarters. When credit rating agencies start shifting your outlook to “negative” (which both Moody’s and S&P did), that’s Wall Street speak for “maybe pump the brakes, buddy.”
Why This Matters for Everyone
Oracle isn’t just any tech company – they’ve become the bellwether for AI spending. When the lead sheep starts stumbling, the whole flock notices. And right now, that sheep is $108 billion in debt and spending money faster than a lottery winner at a Tesla dealership.
The broader AI industry raised a record $108 billion in debt by September – triple the usual amount. Companies like Meta are following Oracle’s playbook, borrowing massive amounts to fund AI dreams that may or may not pay off.
The Bottom Line
Oracle’s earnings revealed the dirty secret of the AI boom: everyone’s spending tomorrow’s money on today’s promises. Sure, AI might revolutionize everything, but right now it’s looking more like the dot-com bubble with better marketing.
The market noticed too – Oracle’s stock dropped 10% after earnings, and other AI-heavy companies are feeling the ripple effects. When your industry’s new poster child can’t generate enough cash to cover its spending spree, maybe it’s time to ask some harder questions about whether all this AI infrastructure will actually pay the bills.
Sometimes the canary in the coal mine isn’t singing because it’s happy – it’s gasping for air.