得益于强劲增长和财务状况改善，ORCL 估值具有吸引力（PEG 0.65），优于同业。

We got Oracle, we got Adobe, and we got Restoration Hardware on deck today.

We do have big earnings today. Restoration Hardware, Oracle, and Adobe will be looking at those. Uh Adobe and Oracle are going to come out first at 5 minutes after the bell and then Restoration Hardware will be 5 minutes after that.

I'm excited for earnings. Uh Oracle's coming up.

Oracle's got a lots of debt, my friends. Lot of money in the debt bundle. Oracle's breakthrough line here is 168 and we're at 154.

Uh, Oracle is still not out. Waiting for Oracle now.

Let's now see Oracle. That's I think the one really everybody wants to look at because it's also a little bit of a proxy for SpaceX to some extent. Uh, you're a data center builder, right? Provider of the data.

Where is Oracle? Oracle's just gone. Just no. Doesn't doesn't want to doesn't want to um come into here with earnings. It's kind of strange. Think it would. It's all right. I'm sure we'll get it any moment now.

Okay. Come on. Oracle is late. What's the point of setting a time, Oracle? Okay, it's fine. Fine. No problem.

Oh, here's Oracle. Okay. License revenue. Oh, big miss on license revenue. 655 million. The expectation was 718. That's a big miss. I've got uh software revenue about beat which is different from the license revenue because that was 555 billion versus 567. Actually that's a slight miss on software. If I look at adjusted revenue, adjusted revenue total actually beat at 1935 versus 19.13. I've got operating margins. Operating margins beat 42% versus 40.8. That's pretty good. Operating income. Oh, that's nice. That's pretty good. That's just a little half million extra or sorry, half a billion of extra. 815 8.15 billion versus 7.81. Yeah, more like 36, but close enough. Adjusted EPS by a lot. 1.92 versus 1.75. It's actually pretty good. Uh because the the part that missed was software licensing. Now, that's very interesting. I've heard that before. Software licensing missing.

Q1 adjusted revenue comes in at 19 uh what do we got here? 1935. So, 1935 billion versus 19.13 as the expectation. Ooh, the stock's up nicely. So, the stock's now up. Oo, look at that. It went straight to my line. That's crazy. 168 straight to my line.

So, we're going to go look at the sheet for Oracle right now. See what what crap they've got cooking up.

Cash from operations $23 billion and their spending on capital expenditures $28 billion. They issued stock of $19 billion. Wow. Uh Q2 revenue, they expect to be up 30 to 34%. Well, that's pretty optimistic.

Yeah, there's licensing. Licensing is usually quite high margin and you can see licensing fell over here. I'm seeing that at other firms too. Oracle revenue Q2 expected up 30 to 34%. Fiscal year rev at 90 billion. and then the fiscal year adjusted EPS to be 810.

Okay, so at 810 that suggests this stock is trading for

Look at that reject on Oracle. 163. Okay. 163 divided by 810 equals I'm at 20.1 times uh is what you're paying here for Oracle.

Software licenses are declining. Fiscal let's see Q1. That's fiscal 26. Oh, I see. Here's where we are. Yeah. So, here's even more of a decline. That's the year-over-year decline. Wow, that's a weird way to put these financials together, I'll tell you that. 655 is a new number divided by 766. That puts me down 14.5%. So minus 14.5% here.

And then if I come up here, I go this is their topline revenue 11607 divided by 7186 year-over-year is up 61.5%. That's probably the data center lease outs essentially.

Okay, let's go see how are their margins. This margin part is actually really useful for Elon.

Those are revenue growth rates. I care a little less about that. I want to see that's revenues. Where are the margins growth rates for revenue revenues? Those are they're only showing revenues here. Jerks.

Uh we do see a decline here in software support as well. Yeah, it's like you can actually see software getting beaten up here negative 1.3% software license and software and then I've got hardware here. That's not it's not a big driver for them, I guess.

Here we go. This is where it's all lumped together. 16 billion bucks. Their expenses for the three months ending August 31. Expenses grew 12617 divided by 10649. Expenses up 11.4%. Sorry, 18.4%.

And revenue, oo, that's up a lot more than that. That's closer to like 25 to 30%. 19345 divided by 14926 29.6%. Should have said 30%. So that's good. That means they're definitely seeing some increase.

Now, in fairness, they're blowing cash flow like crazy to get that increase in revenue. So, it's always a little harder to to look at growth on on companies like this because uh when companies are capital rich, you somewhat have to segment out um capital expense, capital uh return to uh and core business, core business growth, right? Like some of this revenue increase is just because they deployed a bunch of capital. Of course, their revenues are going to be higher.

But I mean, their margins are expanding, which is great because look at this. They were at a 29% margin here. They're at 35% now on a gap basis. So, we're just going to go gap here for a moment. There we go. That's pretty impressive.

So net income's up. Remaining performance obligations also rose. So RPO went from 64177 billion to 664 billion. That is a growth rate of 6 664 divided by 641.77. Uh 3.4%.

Yeah. Actually, I mean, just for giggles, I'm gonna just run evaluation on both of these really quick cuz So, Oracle's growth rate for EPS and then I'm going to look at their balance sheet, too, because I I think it's going to be AWS.

Then I have an operating margin. That's it going up as well. My net income's rising. You know, that's that's great. up margin up. That's great. I've got Wow, the growth rates at Oracle actually actually do look pretty good. I mean, again, they're deploying capex, so you got to balance this out with a well balance sheet, not not to be punny.

30.65 is is the projected growth rate for Oracle. So, this is trading for well below a peg at this point based on these these estimates.

I mean, we're trading for what was the PE ratio on this right here. This is uh the license flag. That's actually really useful for other companies, other software companies, because what they're telling you is, hey, our software is going down, but don't worry, our cloud services are going way up.

Okay. Where did I Oh, here it is. 20x. So, the forward growth rate, 30.6% forecast growth, that puts them at 20.1 divided by 30.6, six. That puts him at a 0 65 peg. Wow. Cheapy, cheapy, cheapy. Now, is it cheap for a reason?

Now the nice thing is they actually gave me the percentages. So for lazy bums like me, I could just go see their cloud is up 62%. their software is compressing. Red flag, right? Just like what we kind of saw in some of the Adobe numbers.

Uh and then total revenue is up 30%. Their operating expenses uh I mean so where why are the operating why are the operating h this is confusing. Why here? Oh. Oh, that's percent of revenue. Oh, okay. I was I was about to vomit. I'm like that doesn't make any sense at all.

Here we go. Total revenues are up 30%. Total operating expenses are up 18%. See that scale coming in. It's pretty good. And their growth rate on cloud is actually scaling out nicely.

Well, they put cloud and software together. Fine. Whatever. Cloud and software uh expenses up 33% versus um cloud expansion. That's a bit misleading because you use a high margin software base to cover up cloud margin.

I wonder if they clean that up here. Maybe that's why we have this sheet. Total revs. No, they don't break it down. At least not here that I could see. Cloud and software losers. So that's misleading. I could see pricing power, but it's it it is hidden somewhat by this software category.

That said, there is a really big gap, right? I've got 60% over here. And software did grow. Oh, sorry. That's 60 again. [snorts] Screwing me up over here. Hold on. Oh, great. Oh, great. How do I redo it? There we go. Um, total revenues up 62%. Total cost. Oh, there it is. Okay. Yeah. Yeah. Yeah. Yeah. 77%. So, it's these other costs that went down. I see. I see. I see. I see. Okay. Okay. Okay. The margin came from lower sales and marketing and uh lower restructuring. Okay. So, that's a little misleading. So, still PP still uncertain.

Okay, focusing on Oracle. I still also don't see Restoration Hardware earnings. I'm watching them.

There it is. Okay, here's the balance sheet. So, these folks have $36 billion in cash loss. I have bills to pay of all of it. Deferred about $33 billion. 33 billion in bills. I have 36 billion cash. Oh, okay. And then I've got some receivables coming in. Notes payable. Wow. Income tax payable. I've got 119 plus lease obligations plus 28. 119 plus 28. 147 billion of debt plus 30.5 billion in uh leases. Yeah, I mean there's there's some debt here.

Now, how big is this guy? Let's see. This is well add 7% to this but so it's it's like a half a trillion dollar company but they've certainly come up from the floor. I think they during LEO fold I think they were much lower. Yeah they were down at 114. So they're coming back from the dead essentially as as their revenue is starting to grow.

uh mostly because you know now you can finally start deploying chips and you're getting a return on on some of your investments that you're making into AI and they seem capable of servicing the debt that they have within the next year. Although they've had to issue some stocks.

Oracle's debt is not horrid. It's I mean, it's bad. It's not horrid. See, we're sitting at 147 plus 30 divided by a $500 billion company. They're like 35% long-term debt, right? Uh I And and then that would they've got enough cash to pay their bills. Enough cash to pay bills.

Now, how did they do that? Because they didn't they didn't used to have enough cash to pay their bills. They raised money. What a surprise. That's what we thought they would have to do. So, as you can see here, they've had to raise $20 billion in stock, raised raised uh money.

Uh, and then you go in over here and I want to see the increase of debt in the long term. I need to just mark this cash flow. Okay. Okay. Here, their long-term debt has also increased. So, their non-current liabilities, I mean, I could just add all this up right here. Total debt is up about what is that 188.5 minus 177 about 6%. 6% increase year-over-year in in long. So, they've actually slowed down their debt issuance. So, issuance has slowed. We got enough money to pay the bills. Our cash flow indicates they actually paid off debt. I mean, they can't do much of that anymore, but they paid off some debt. That's interesting. Huh. Okay. It's actually not as horrible as as it used to be. It's It's gotten a lot better.

Uh let's see here. Research and development. I wonder what they're researching. It's down. So, not much apparently. See, like I wonder how much can if they're just going to get into the data center business, how many people can they lay off? Not that you want them to lay off people, but I mean that's probably what you're seeing in the restructuring expense here.

Huh. See, that's what I would want to look at in the uh the earnings call. Let me see if I just Google Oracle Oracle layoffs. Uh large layoffs incoming September 8th. Look at that. Dude, that's going to plummet their expenses. Oh my gosh.

Where is it? Industry code. Uh, these are just some people say layoffs are a regular thing each year at Oracle. Not accustomed to mass layoffs like this nine hours ago. What is this? Clay trying to emulate Musk, not realizing he set a precedent with a throwaway tech company.

Let me see. Here's another one. Oracles successive layoffs to generate funds for AI infrastructure, RBC says. Yeah. So basically they just keep laying people off because the the services side or the software side's going down.

Uh this is where somewhere here it had the September 8th but I didn't see that announcement. Hm. Interesting. Because if we go here, we could definitely see. Look how much red there is. If we just circle the red or put a box around the red, we're going to go sales and marketing down, services down. Oops. Sales and marketing down, services down, restructuring, that doesn't matter. Imagization, that doesn't matter. This whole section and GNA is flat. So they kept GNA flat and then they cut marketing and all this other crap.

Dude, I'd rather buy Oracle than this. And and I don't like Oracle. At least historically I haven't. Maybe if the whole AI thing doesn't go bust, they'll be pretty juice.

Is there is there anything to say about Oracle?

Okay, let's see. Oracle has contracted for 4.5 buildout. That's buildout. That's pipeline. But you also did just get literally today Oracle signing an open AI deal. $300 billion, the majority of new revenue revealed by Oracle will come from the open AI deal.

Open AAI signed a contract with Oracle to purchase $300 billion in computing power over roughly five years. Okay, that's five years. So that's $50 billion a year.

Largest cloud contracts ever signed. The contract will require 4.5 gawatts of power capacity.

300 divided by 4.5 divided by 6. Dude, that's 11 billion per gigawatt per year. That's actually a cheap contract, you know, unless I'm misreading that, which I don't think I am. That that seems like a a pretty cheap contract.

So if Oracle is doing 300 billion for 4 and a half gaww, I mean that's a huge deal. Oracle is much cheaper by a wide margin. See that's bearish a little bit uh for for the big buildouts.

Oracle management has confirmed a framework of 10 to 11 million per megawatt.

So, uh, Oracle shares have surged as much as 43% on Wednesday after a cloud company revealed it added 317 in future contract revenue. Share price surged, pushing him into the range of Elon Musk.

The contract which starts in 2027 is a risky gamble for both companies. Less than 1/5if of the 60 billion it will have to pay on average a year. Oracle is concentrating a large chunk of its future revenue on one customer will likely have to take on debt to buy the AI chips.

Yeah, Oracle gave the first hint of the deal in June that it struck an agreement that would give it more than 30 billion in annual revenue.

The giant will receive more yearly revenue from OpenAI over time as more data centers come online. I this is this is actually I'm really glad I saw this because this is very bearish. This is exactly what I've been worried about is that these long-term contract deal values would substantially compress.

It's good for Oracle because Oracle is underwritten like for death, but SpaceX is underwritten for, you know, super optimism.

Anyway, we'll do a full breakdown here uh in just a moment on uh this these Oracle earnings and SpaceX, but that's that's a pretty big deal.

Oracle just sent a massive warning to SpaceX. And even though there are some really, really bullish earnings revision estimates for SpaceX, I'm a little concerned some of those earnings estimates are based on premium underwriting and Oracle earnings just gave us a big middle finger to that underwriting.

Oracle contract will require 4.5 gawatts of power.

It's really actually good for Oracle. The OpenAI and Oracle contract which starts in 2027 is a risky gamble for both companies.

and uh this is uh or Oracle is expected to have to take on debt to actually build this out.

Revenue growth was actually pretty decent. We increased revenue by 62% year-over-year. Software declined 3%. In fact, uh in in a later piece, you'll see that their licensing revenue fell even more. So software is getting hit.

And not only is software getting hit, but they're just cutting jobs. Look at this. Services down 4% in expenses, presumably jobs. 12% down in sales and marketing, presumably jobs. R&D down 4%, presumably jobs.

We have a company that is increasing revenues, but it's costs of those revenues are actually growing faster than their revenues are. Revenues are growing 62%, costs are growing 77%. So, PPE isn't growing well, although it looks like they did because their operating expenses are only up 18%, but that's only because they cut jobs.

They actually repaid $4.2 billion of debt. That's nice. In fairness, they issued basically 20 billion of stock. Now, is it possible they've bottomed out on the stock because they issued 20 billion of stock? Maybe,

because their balance sheet is actually not as horrible as it used to be. They did spend more than they made. So, they had negative free cash flow of like $5.4 billion. Not great.

So, their cash has grown to about $36.3 billion. They do have enough cash to pay their bills because they finally raised enough money. They have $36 billion in cash and they have $33 billion in bills. So, they finally have enough money to pay their bills.

They've got about 35% of their company's market cap in long-term debt, and this is going to go up even more to go finance their OpenAI contract. So, a bet on Oracle is really a bet that OpenAI is going to pay their bills.

So far, I would say there's no sign that they're going to roll off a cliff yet. I think the bigger learning lesson from this isn't that if you're betting on Oracle, you're betting on OpenAI. That's okay. Like that could be a reasonable bet because we could watch what happens with the anthropic IPO. We could watch what happens quarter over quarter with anthropic earnings and their margins. Uh are they starting to fall off a cliff because of uh you know commoditization from Chinese openweight models or US open weight models. We'll see. The earnings will tell us that. So you'll kind of have a little canary in the coal mine for Oracle.

I think the bigger issue here is that Oracle uh is signing deals on long-term contracts for like 13 to 15 billion per gigawatt, which that puts you closer to a 3 to fouryear payback period on the data centers. That's not bad. That's still decent. You're still getting an ROI. If you could pay back a data center in even five years, you're now making money on it.

Focusing though on Oracle, this is not as bad as it used to be. And if you actually look at the valuation of this company, it's dirt cheap. Yeah, this is where we saw license revenues down 14.5%.

Oracle revenue in Q2 is expected to be up 30 to 34%. That's the guidance. They've got they're trading for about 20 times earnings and their forecast growth rate before the opening ideal was 30%. So we're trading for a 65 peg right now. It's actually trading dirt cheap right now. That's that's actually not bad.

This is good for hardware. H it's cleaned itself up. It's signing the right deals. It's firing people where they're losing money and they're investing more money. Where they're making more money. They're doing everything they should.

Ironically, I actually like Oracle better here than Restoration Hardware. And I think Oracle is giving us really good transparency on what deal pricing actually should look like for companies like um the data center place overall.