Analysts Turn Cautious on Oracle (ORCL) Amid Soaring Cloud Spending

Oracle Corporation (NYSE:ORCL) is one of the Trending AI Stocks on Wall Street. On November 10, Erste Group downgraded the stock rating from Buy to hold, flagging rising liabilities and declining ROA amid heavy cloud investments. The firm anticipates margin and FCF growth to soften ahead.

While Oracle is expanding its cloud offerings with new cloud data centers and achieving significant growth in the area, the traditional software business has witnessed a slight decline.

According to the firm, high investments will likely have an impact on the growth in free cash flow, and operating margin is also likely to fall slightly over the next few years due to the high level of investment.

“The Group is expanding its cloud offerings with new cloud data centers and is achieving significant growth in this area. Conversely, the traditional software business recorded a slight decline. Due to the high level of investment, non-current liabilities have risen sharply and the return on assets is declining. We expect the growth in free cash flow to be impacted by the very high investments and that the operating margin will also fall slightly over the next few years.”

Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.

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