Oracle Rises As AI Backlog Hits $664B, Adobe’s Earnings Beat Not Enough for Investors

0:00public.com presents the rundown your daily market update in 10 minutes. My name is Zadeh Dundmani and today is Friday September 11th. In today's episode we'll break down this morning's inflation report and why the odds of a rate hike just jumped. We'll also recap oracles earnings and their new pre-order strategy when it comes to AI data centers. Then stick around to the end of the show to find out why returning your online purchases is getting a lot more annoying these days. We got a great show for you today. Let's go. Well stocks kept moving lower this week the S&P 500 fell 0.6% on Thursday while the NASDAQ dropped 0.7% making that the fourth straight red day for the market. And you know at this point I think the story driving the stock market has clearly shifted from the AI hype this past summer to macro factors like oil prices and the bond market. Oil prices

1:00continue to surge yesterday with Brent crude now trading above $107 a barrel as the war with Iran continues to disrupt the energy market. At the same time the 10-year treasury yield jumped to 4.94% while the 30-year yield hit 5.36% its highest level since 2004. And the fact that the 10-year treasury yield is approaching 5% I mean that is a pretty significant psychological level. You know the 10-year treasury yield is low key the most important metric in the financial system and the economy. It influences everything from corporate borrowing cost to mortgage rates. In fact the average 30-year mortgage rate is back above 7% again. Not to mention higher bond yields make stocks less attracted to investors because investors can thus earn 5% lending money to the US government which is a risk-free return. So the macro picture is getting ugly and by the way the CPI report from this morning isn't helping. According to the August CPI report prices jumped 0.4% in August month over month and they

2:00were up 3.4% year over year. Now those numbers were in line with expectations but core inflation which strips out food and energy prices came in that 0.3% month over month which was hotter than the 0.2% that Wall Street expected. So that's a sign that higher energy costs are now bleeding into other prices across the economy. And remember this inflation report is backward looking. It's for the month of August and we've seen crude prices jump 15% in September already so things could continue to get worse. And that's why the odds of a rate hike for the Fed meeting next week just jump from 70% before the inflation report to 90%. Now my personal opinion for the last few months has always been the Fed would hold off on hiking rates until next year but now it looks like we're getting a rate hike next week. So we are in a very interesting moment for the markets right now we're going to be staying on top of all this so definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop. Let's run through some headlines starting with Oracle. Oracle reported earnings last night

3:08and the stock is getting a nice pop this morning after a pretty strong quarter. Revenue's jumped 30% from a year ago to 19.3 billion dollars estimates while adjusted earnings came in that $1.92 cents a share versus the $1.74 that was expected. So it was a strong quarter from Oracle and you know it was a year ago where Oracle really burst onto the scene and the markets started taking them seriously as a potential winner of the AI boom. Oracle stock hit all the time highs back in September of 2025 but since then it's been a bumpy ride the stock is actually down 50% from those levels but Oracle's business continues to crush it especially their cloud infrastructure business. This is a part of the company that includes their data centers that they rent to companies for AI computing power. Revenue's for the cloud infrastructure were up 121% from a year ago to $7.4 billion and you know if you take out that division the rest of Oracle grew just 3% so almost all of Oracle's growth is coming from AI and the demand for AI compute is still ridiculously high. Oracle signed more than 30 billion dollars

4:12in new AI cloud contracts last quarter pushing their total backlog to $664 billion. That was well above what Wall Street was expecting. Now there were a couple concerning things in the earnings report when you dig a little deeper. For one almost half of Oracle's backlog is from a single customer which is OpenAI. Oracle did say that their non-open AI backlog more than doubled in the past year but still there is pretty big concentration risk there. The other problem for Oracle is their CapEx. I mean the cost of building the AI infrastructure and serving the compute continues to explode. Oracle spent $28.5 billion in CapEx this past quarter just for some contacts a year ago they spent just $8.5 billion in the same quarter and all that spending is impacting their free cash flow. It came in that negative $5.4 billion and the company is sitting on $125 billion in debt. So because of all that AI spending, analysts don't expect Oracle to generate free cash flow again until 2030. Now what did catch my attention is that Oracle has come

5:15out with a pretty interesting way to reduce some of their financial burden. Oracle is now asking their customers to pay up front for data center capacity and basically moving to like a pre-order model. The company said that for some of these massive AI contracts their customers are now pre-paying Oracle for the computing capacity or the customer it goes out and buys the GPUs themselves and gives it to Oracle to put in their data centers. So Oracle is like adopting a BYOC model, you know bring your own chips. And you know I think this is a smart move by Oracle because instead of them going out and borrowing billions of dollars and buying a ton of Nvidia chips and then hoping someone rents them the customer just signs the contract first and helps pay for the hardware up front. Oracle says they received 14.4 billion dollars in customer prepayments just in the past quarter. So that's a pretty clear sign that demand for AI is not slowing down anytime soon if Oracle is able to get their customers to agree to those terms. But this does not eliminate the risk for Oracle. I mean Oracle still has to build the data centers. They have to secure the power. They got to install everything and actually deliver that capacity. For now though the

6:17market seems like the direction that Oracle is headed and the stock is up around 7% this morning at the time of this recording. Let's talk about some stocks making moves today. Shares of our HR up this morning after the luxury furniture maker delivered better than expected earnings and a strong guidance. Revenue's were up 2.6% to 922 million dollars. That top estimates of 915 million and the company now expects full year sales growth of 5.5% to 7% which was ahead of the 5.6% that Wall Street was expecting. Now just like we've seen with other retailers, RH did get an earnings boost by getting $55 million in tariff refunds last quarter and they expected to get another $13.9 million in tariff refunds in the second half of the year. The company said they're going to use some of those refunds money to go towards offsetting unplanned supply chain costs related to rising oil prices and the conflict in the Middle East. RH stock has suffered from a slow housing market. People tend to buy new furniture when they

7:19move into a new house and no one's buying houses these days. That's one reason why the stock is down 30% on the year. But shares are getting a mini bump this morning. It's up 2% following the earnings report. Now on the flip side, Adobe shares are falling despite reporting another earnings beat. Revenue's for the quarter jumped 13% to $6.76 billion. That was ahead of expectations. Now just did earnings also beat estimates. And I gotta say there were some genuinely encouraging AI numbers from Adobe. The company said that annual reoccurring revenue from its AI first product screen more than 150% from a year ago. On top of that, they now have over 1 billion monthly active users across their platform. So those are some pretty impressive numbers but Wall Street still wasn't convinced that Adobe will survive the AI era. For years, Adobe's software like Photoshop and Premiere were basically the industry standard. But now Adobe is facing a ton of pressures. Not just from companies like Figma and Canva, but also from ChatGbT Claude and other AI tools. So despite Adobe continuing to beat earnings after earnings, the stock keeps dropping. It's down 25%

8:25on the year. Let's wrap the show with a fun fact. Returning stuff that you bought online is getting a lot more annoying these days. According to the Wall Street Journal, 68% of retailers now charge a return fee at least some of the time. Five years ago, that number was 43%. And the reason these retailers are doing it is because processing a return costs merchants an average of 27% of the original purchase price. So these merchants are finally cracking down with surprise mail-in fees, companies like Zara, H&M, Uniclo and TJ Maxx now charge between $5 to $12 to mail something back. On top of that, return windows are also getting shorter for many retailers like Macy's and Home Depot. And even Amazon is getting more aggressive about this. They now flag products that are frequently returned and they ask customers why they're sending stuff back and they even send notices to people who return more frequently than the typical customer. And I guess none of this should really be a surprise at this point. Free returns were basically a way for retailers to get people more

9:28comfortable buying things online. And now that everyone is totally cool with buying stuff online, I think these companies are slowly pulling back because processing returns is expensive. At this point, I don't think people are going to stop buying things online even with more restrictive return policies. So long term, this could lead to slightly higher profit margins for these retailers. Let me know in the comments on what you guys think and how you guys feel about the whole return thing. Will these restrictive policies stop you from shopping online? Drop your thoughts on Spotify and YouTube. Well, alright guys, that's the rundown for today. That's the rundown for this week. I hope you guys enjoyed today's episode. By the way, no deep dive episode this weekend or interview, but we should be back to our regularly scheduled programming starting next week. Also, if you guys have like five extra seconds and want to help out the show, consider giving us a five star rating on Apple, Spotify, YouTube, wherever you listen to your podcast. You know, all that engagement really does help us out and it helps other people find the show. Thank you guys so much for listening, watching and commenting. Shout out to Mike for all the work behind the scenes.

10:32And we'll see you guys back here next week.