ORCL — Oracle Corp.

Will it survive?

• Can it pay its interest? 4.9×
  Adequate
  Operating income $17.7B ÷ interest expense $3.6B

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt? 0.4×
  Conservative
  Total debt $7.3B ÷ operating income $17.7B

  Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.

• How long is cash tied up? -799d
  Negative — funded by others
  DSO 54 + DIO 54 − DPO 907 days

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”) — the company grows on other people's money.

Is it a good business?

• Return on invested capital 92%
  Exceptional
  NOPAT $15.5B ÷ invested capital $16.9B (debt + equity − cash)

  The rate the business earns on the money tied up in it — Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high — pair this with Owner Earnings.

• Owner Earnings (free cash) margin -1%
  Consumes cash
  Owner Earnings ($394M) = operating cash $20.8B − capex $21.2B

  What an owner could take out without starving the business. That's -1% of revenue. Treating stock comp as the real expense it is (less $4.7B of SBC) leaves ($5.1B). Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).

• Are earnings backed by cash? 1.67×
  Cash-backed
  Cash from ops $20.8B ÷ net income $12.4B

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy — growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? —
  No surplus to allocate

  The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing — not from operations.

• Investing or harvesting? —
  Not enough data

  The filing data didn't include the inputs for this check.

Durability & moat — 2016–2025

A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says — judgments, not another chart of the numbers.

• Profitable years 10 of 10

  Never lost money over the record — the earnings stability Graham insisted on.

• Return on capital ≥ 15% 6 of 6 yrs

  A moat shows up as a high return on invested capital that holds year after year — not one good vintage.

• Operating margin 34% → 30%

  Margins are slipping — competition or costs are biting in.

• Reinvestment — incremental ROIC returns capital

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth −8%/yr

  Free cash to owners shrank about 8% a year over the record.

• Worst year 2022 · 25.7% op. margin

  Stayed profitable even in its hardest year — the resilience that survives recessions.

• Share count −4.4%/yr

  The share count is shrinking — buybacks are quietly growing your slice of the business.

• Dividend record rising

  Paid and raised the dividend across the record — the continuity Graham prized.