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Free cash flow divergence helps explain why Apple outperforms Oracle
Apple generated about $129 billion in trailing 12-month free cash flow, while Oracle has seen a $24 billion outflow, highlighting how capex intensity is reshaping tech share performance.
Free cash flow has become a key driver of tech stocks this year as investors focus on capital spending, Yahoo Finance says, with the same cash flow line reading differently for companies with different business models. The outlet points to Alphabet's first negative free cash flow quarter as an example of how quickly the market can react after earnings.
For Apple, Yahoo Finance highlights roughly $129 billion in trailing 12-month free cash flow, and says the stock has benefited from that cash generation even as investors remain attentive to capex. The article notes Apple’s forward price-to-earnings ratio has risen to 35 times.
Oracle’s situation looks very different, according to Yahoo Finance. The outlet says Oracle has had a $24 billion outflow and that its shares are down 52% since June 2, with a 40% year-to-date decline compared with an 8% gain for the S&P 500.
Yahoo Finance also attributes Oracle’s valuation slide to financial swings that it says are being funded by new debt, and it notes Oracle is trading at its lowest forward P/E ratio in more than four years at 14.2 times, compared with about 20 times for the S&P 500.
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