Jefferies Brent Thill on Oracle: Institutional investors still worried about the balance sheet

Let's now bring in Brent Thill of Jeffries for more on this. And as you recall, Brent joined us right after the earnings cross. Brent, great to get your take. You're fairly constructive yesterday on the print. You said peak negativity was going into the print here, and this is sort of a sigh of relief. Here we are. The stock is down. So what's your feeling in talking to Client's Day investors today about about the quarter and what it means for Oracle? Hey, Melissa, saw clients all day in London, and I would say the feedback from institutional clients here has been that it just wasn't enough. And there's still concern about the balance sheet. There's also concern relative to do I own Oracle or can I own Microsoft, Amazon and Google, who seemingly are in a potentially better position? So I think there are multiple factors that are weighing on the story at this point. So, Brent, what would you point to as potential proof points? I mean, the Oracle has traded a little more like kind of the neoclouds than it has, you know, one of the hyperscalers with a more resilient business model. But from here on out, they're going to do the spend. For now, they think they have the capital necessary. They seem to be kind of on this treadmill that's running pretty fast. But so far, they're they're staying upright. Yeah, I mean, I think you go back to, you know, Oracle's core value prop at the beginning of this whole infrastructure build was software, right? Double digit growth software business with a mid 40 percent operating margin. And now they've chosen to go after infrastructure. It's lower margin. It's capital intensive, requires a lot of funding. They have, you know, raised the potential issue for, you know, additional equity raises. So I think there's you're going from a story that had, you know, again, lower growth, high margin to a higher growth, potentially lower margin business. And then the balance sheet, quite honestly, just a mess right now relative to other companies we cover, right, 130 plus billion debt, 30 plus billion in cash and, you know, 30 plus billion in operating cash flow. And they've said, you know, free cash flow is going negative. So it's a short term trade off. And as we said, you can't look at this over the next day, two weeks. You have to look long term. They will be one of the few vendors that helps build out the infrastructure boom. And we think we'll look back and there's only a handful of companies that can really reap the reward. So Oracle has been through transitions like this before. Larry Ellison has caught every other side of these tectonic shifts and they've been a survivor. And again, I think most investors are just super skeptical in my entire group. Everything is trading below all the other stories because of what's happening. Do you want to own the tech companies that are spending the capital or receiving the capital? And Microsoft, Amazon, Google, Oracle are all spending the capital. And that's why infrastructure, all the liquid cooling to infrastructure, using utilities to land the data centers, they're all outperforming because they're receiving the capital. So I think this is just more of a general fear of, hey, they're spending. Why do I need to be there? When does this free cash flow switch? And then secondarily, you have an application business that could be under duress from AI with the likes of Anthropic. And can you actually build some of these applications that Oracle once sold? So there are kind of multiple issues that are weighing on the group right now.