News about corporate debt

Oracle reported fiscal Q1 revenue up 29.6% to $19.34 billion and adjusted EPS of $1.92, above the $1.74 consensus, while cloud infrastructure rose 121%. Remaining performance obligations reached $664 billion, and management raised its fiscal 2027 targets to at least $90 billion in revenue and $8.10 in EPS. However, free cash flow was negative $5.40 billion in Q1, capex guidance is $90 billion to $95 billion, interest expense rose 55% to $1.4 billion, and liabilities total $236 billion against $67 billion of equity. The stock is down 48.63% over the past year while the S&P 500 gained 11.94%; the average analyst target of $235.80 implies about 69% upside, though targets are only estimates. The article says the key question is whether backlog converts into revenue and cash flow, since the outlook weakens if conversion stalls, financing costs outpace revenue, or a major AI customer pulls back.

Amazon spent $77.3 billion on property and equipment in the third quarter, more than double the $35.1 billion a year earlier. AWS grew 39% year over year, its best pace in almost five years, but companywide sales rose only 12% to $201.9 billion and EPS of $1.89 fell from $1.95 a year earlier, both below Wall Street's targets. Free cash flow over the past 12 months was a loss of $42.4 billion, compared with a $14.8 billion gain a year earlier, while total long-term debt rose from $65.6 billion at the end of 2025 to $173.1 billion. Amazon still expects about $220 billion in capital expenditures in 2026. The author sees the main risk in cash flow and borrowing, and is skeptical about the long-term payoff of AI investments and about demand from AI labs such as Anthropic and OpenAI if their growth slows.

Amazon's AWS revenue grew 39% in the third quarter, its fastest pace in nearly five years, and the unit posted its highest operating margin ever, yet shares fell about 6% in early after-hours trading. Net sales rose 12% to $201.9 billion and operating income climbed to $28.1 billion from $17.4 billion, with AWS earning about 63% of operating profit. Trailing 12-month free cash flow turned to an outflow of $42.4 billion from a $14.8 billion inflow a year earlier, as long-term debt nearly tripled since December to about $173 billion. Amazon kept its plan to spend about $220 billion on capital projects this year, and advertising growth of 12% is expected to reach the high teens in the fourth quarter.

The author concludes that weak corporate capex is not unique to India and does not expect a strong pick-up in India's corporate capex over the next few years. India's corporate capex has held at 14-15% of GDP over the past decade, its lowest level in almost two decades, though it is not low compared with most major economies, where China leads at 26%. India's total investment-to-GDP ratio averaged 33% in recent years, second only to China's 40%, with household capex offsetting a corporate share that has fallen to about 45%. Excluding China, global corporate capex has been stagnant at about 14% of GDP for two decades even as global profits rose from 6% to 9.6% of GDP. India's corporate debt fell from 70% of GDP in 2011-12 to 48% in 2023-24 before rising back toward 50%, a deleveraging pattern the author says is common internationally, while US corporate debt hit a decade low of 48.7% of GDP in Q2 2026.