Oracle's Sales Soar. Its Layoff Budget Grows Too.
Infrastructure sales more than doubled. That has not stopped Oracle from expanding its restructuring plan, largely devoted to severance.
Vincent Jiang · 2 min read
The signature after the sales pitch
Hilary Maxson credited cost efficiencies with protecting Oracle's−8.46% — Oracle, down 8.46 percent today margins on September 10.1
A day later, the finance chief signed a filing disclosing an approximately $700 million expansion of the company's restructuring plan.2
A bigger budget for departures
That brings expected costs to roughly $2.8 billion, largely severance. The addition reflects further planned actions; Oracle did not disclose a new layoff count.2,3
By May 31, Oracle already employed about 21,000 fewer people than a year earlier. That is a historical net headcount decline, not Friday's layoff count.3
Success can squeeze workers too
The sales engine is working. In the quarter ended August 31, infrastructure revenue climbed 121% to $7.4 billion. Total revenue rose 30% to $19.3 billion.4,8
But infrastructure changes the economics. Adjusted gross margin fell to 61% from 68.7% a year earlier. Maxson said lower operating costs helped offset that pressure.1
The inference: strong demand can coexist with pressure to shrink payroll. Revenue growth alone offers workers little protection when the growing business consumes more capital, whatever story the earnings call tells about the cuts.
The cash still falls short
On July 9, S&P Global Ratings$123B — S&P Global Ratings, private, latest valuation $123B downgraded Oracle to BBB-, citing greater business risk and weaker cash flow.5
The latest quarter generated $23.103 billion in operating cash and consumed $28.499 billion in capital spending. Subtract them: negative $5.396 billion in free cash flow.6
The comparable shortfall a year earlier was $362 million.6,7
Customers are helping fund it
Customers prepaid $11.36 billion during the quarter. Those prepayments are already inside operating cash flow.6,8
Oracle also reported 97.9% GPU utilization. Analyst Rebecca Wettemann said utilization showed contracted business converting into recognized revenue. The cash deficit was smaller than analysts expected, and Oracle remained profitable on an accounting basis.4,8,9,10
Still, those figures do not tell employees whether the expanded restructuring plan will be the last.
Make the next forecast count
At its October 28 investor meeting, watch for a clearer path to positive free cash flow and the remaining restructuring costs.11 It is the question every financed buildout eventually answers.
The boom reaches workers when keeping them stops looking like the expensive option.
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