Does heavy spending by Oracle signal long term upside?

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Oracle (ORCL) has recently increased its investments while many other technology companies right now are cutting down their investments and playing it safe. Oracle is a database and cloud software company based in Austin, Texas, and its main competitors in the cloud industry are Amazon, Microsoft, and Google. 

Back in June, Oracle purchased Cerner Corporation, a healthcare records company for roughly $28 billion with the hopes of strengthening its cloud services. Although Oracle only makes up 2% of the cloud market, Oracle aims to compete with Amazon, Microsoft, and Google by building smaller data centers in more regions (Statista). By doing so, Oracle currently has data centers in 40 regions which is almost double the amount AWS has. 

Expanding data centers does come at a cost since Oracle has spent over $2.44 billion in capital expenditures during the 2nd Quarter which is a 163% increase in their capital spending. The increase in spending has put Oracle as #1 for the highest capital expenditure growth in the Software & Programming industry.

Despite capital expenditures creating a big expense for the company, these expenditures don't come without any reward because Oracle has shown they are able to compete with the big 3 cloud companies. They recently have been awarded a Joint Warfighting Cloud Capability contract worth $9 billion along with other big cloud companies like Amazon, Microsoft, and Google. 

Oracle has been down 6% YTD to $80, but analysts predict that they have an upside of 46%, a downside of 32%, and a median of 10% within the next year. Oracle displays a positive outlook by gaining traction within the cloud industry and its acquisition of Cerner which shows they are trending upward in the next year.

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